Functions of the HRA Calculator

Most salaried employees receive a House Rent Allowance, or HRA, as part of their monthly salary. Those who live in a rented residence may be able to save on their taxes. Let’s see the functions of the HRA calculator.

What is HRA? 

The complete form of HRA is House Rent Allowance, which constitutes a portion of your salary given by your employer to cover the expenses related to rented accommodation. To avail HRA exemption, you must currently reside in a rented house. HRA exemption falls under Section 10(13A) along with Rule 2A of the Income Tax Act, 1961. Let’s review the rules and calculations for HRA below. Functions of the HRA Calculator

What Are the Functions of the HRA Calculator? 

A house rent allowance (HRA) calculator is a tool that helps individuals calculate the amount of HRA they can claim as a tax deduction. The primary function of an HRA calculator is to determine the HRA exemption that an individual can claim based on their salary, rent paid, and the city of residence.

Tax Deduction on HRA – Eligibility Criteria 

If you are a salaried individual and receive House Rent Allowance (HRA) as a part of your salary, you may be eligible for a tax deduction on the HRA received. However, there are certain eligibility criteria that need to be met in order to claim this deduction.

The first criterion is that you must be a salaried individual who receives HRA as a part of your salary. Self-employed individuals are not eligible for this deduction.

The second criterion is that you must be paying rent for a residential accommodation. The rented accommodation must not be owned by you or your spouse. If you are living in a house owned by your parents, you can still claim the deduction provided you pay rent to them.

What Is the Calculation of the House Rent Allowance (HRA), and How Is It Calculated? 

In India, both public and private sector employees receive a salary comprising various components, including HRA (Housing Rent Allowance), which is allocated for different expenses. The HRA can either be fixed or negotiated through a specific agreement between the employee and the employer.

The tax exemption for HRA falls under Section 10-13A of the Income Tax Act, and it allows for a deduction based on the lowest amount among the following:

1. The actual HRA amount provided by the employer.
2. 50% of your salary if you reside in a Metro city in India.
3. 40% of your salary if you live in a non-metro city in India.
4. Actual rent paid each month, minus 10% of your salary (salary includes basic salary, commissions, and dearness allowance).

To calculate the HRA deduction, one must consider these factors and choose the most advantageous option based on their specific situation.

Conditions for Claiming HRA Exemption / HRA Deduction: Important Points to Remember

Conditions for claiming HRA exemption are as follows:

1. HRA exemption is applicable only when the rent is paid to a landlord as per Section 80 or other relevant sections.
2. No HRA deduction is allowed for periods when the rent is not paid.
3. If there is a change in job location (e.g. from a non-metro to a metro city or vice versa) or a change in salary, the HRA deduction is calculated monthly, leading to varying exemptions or deductions during the periods of change.
4. If you pay rent to any family member other than your father, the employer will provide HRA and related tax exemptions. However, to claim the HRA deductions, you must pay rent regularly on a monthly basis, preferably through bank transfers for easier verification by the IT department of your expenditure.

HRA Rules for Self-Employed Individuals

For self-employed individuals, there is a provision to claim House Rent Allowance (HRA) deduction and tax exemptions under Section 80GG of the Income Tax Act. This rule also applies to salaried individuals who do not receive HRA.

The HRA rules under Section 80GG are as follows:

1. Only Hindu Undivided Family (HUF) and individual taxpayers are eligible for HRA exemption under the Act.
2. Self-employed individuals and salaried individuals can claim rent deductions only if they do not receive tax exemption under Section 10-13A.
3. The individual, HUF (where the individual is a member), spouse, or minor child should not own any accommodation where the taxpayer is residing or working to claim the HRA exemption.
4. Taxpayers cannot claim HRA exemption under Section 80GG if they are already availing tax benefits for any other self-occupied property they own elsewhere.
5. To claim HRA deduction under Section 80GG, individuals need to provide a self-declaration using Form 10-BA, showing that they meet all the aforementioned conditions.

Tax Advantages Provided by Section 80G if There Is an Absence of HRA 

Section 80G of the Income Tax Act provides tax benefits to individuals and organizations who make donations to certain charitable institutions and funds. If an individual does not receive House Rent Allowance (HRA) from their employer, they can still claim tax benefits under Section 80G.

Conclusion 

Looking for a hassle-free way to calculate your House Rent Allowance (HRA)? Look no further than Vakilsearch’s HRA calculator!

Our HRA calculator is a user-friendly tool that helps you determine the amount of HRA you can claim as a tax exemption. All you need to do is enter a few basic details such as your salary, HRA received, and rent paid, and our calculator will do the rest.

With Vakilsearch’s HRA calculator, you can save time and effort while ensuring that you claim the maximum tax exemption possible. Plus, our calculator is completely free to use, so you can calculate your HRA without any additional costs.

So why wait? Try out Vakilsearch’s HRA calculator today and make your tax planning a breeze!

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Read More: 

• Steps to Calculate HRA in Salary with Example
• Process of Calculating HRA in Tax Benefits 
• How to use HRA Calculator?