House Rent Allowance (HRA) Calculator

Are you aware of how to calculate your House Rent Allowance exemption?

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What Is HRA?

House Rent Allowance (HRA) is a portion of your salary that your employer provides to cover the costs of rental housing. Only if you are living in a rental home are you eligible to claim an HRA exemption. The Income Tax Act of 1961's Section 10(13A) and Rule 2A both apply to the HRA exemption.

Employees who are residing in a rented home can use HRA allowance to completely nullify the taxes to a greater extent. This reimbursement is for costs associated with rented housing. This allowance is entirely taxable if you don't reside in rental housing.

HRA exemption is available to salaried individuals who receive housing rent allowance as a component of their compensation, providing they contribute to their rent payment. HRA exemption completely or partially lowers the taxable pay.

One can check the deductions in Form 16 under Part B. This form will be produced by the employer when you file your ITR Returns. In order to file a revised return the applicants will be provided time until the end of the assessment year. You can file for a revised return if your HRA claim is not submitted with the income tax returns.

Eligibility Criteria for HRA Exemption

The tax prediction statement provided by the employer at the beginning of a financial year includes the HRA amount. Your company takes the HRA out of your pay. You'll be able to view the deduction in Part B of Form 16 that was produced by your employer when you file your ITR (Income Tax Returns). You have time till the end of the assessment year to file a revised return if your HRA claim was not submitted with your ITR.

The following rules are applicable for HRA claims:

  • Your HRA cannot exceed 50% of your base income

  • The exemption is dependent on at least one of the following, thus the full amount cannot be claimed

  • Actual rent payments (-) 10% of the base pay is the formula for HRA calculation

  • HRA received in actuality from the employer

  • If the tax-claimant resides in a metropolis, 50% of the basic pay

  • One can apply for HRA benefits if they have a mortgage

  • If you are a homeowner, you can pay your parents rent and provide the necessary documentation to be eligible for HRA payments. In the same situation, you cannot pay your spouse's rent while claiming HRA.

  • It is required to submit the HRA claim form with the landlord's PAN information if the rent exceeds ₹1,00,000.

  • You should subtract 30% tax from the rent if the landlord is an NRI and then declare the difference

This means that the following guidelines are used to determine the HRA tax exemption:

  • Actual HRA received

  • Actual rent paid - 10% of salary

  • if the tax-claimant lives in a metropolis, 50% of the basic salary

  • If the tax-claimant lives in a non-metro city, 40 % of the basic pay is required.

You can ask your company to restructure your compensation to maximise your tax benefit because the least of the aforementioned is exempt from HRA taxation. In the event that the determining criteria don't change, the HRA computation can be done annually. The calculation can be carried out on a monthly basis in the event that any factor changes within the relevant financial year.

Requirements for HRA Exemption

  • The HRA exemption is only offered under Part 80 or any other Section when you pay the landlord directly for the rent

  • Whenever the rent is not paid, there is no HRA deduction

  • The HRA deductions are calibrated every month and are perfectly altered in case of job changes or location changes. As a result, the HRA exemption or deductions may change for each of the change periods independently

  • If you rent to any other family member besides your father, the employer will grant HRA and associated tax exemptions.

Documents Necessary to Request an HRA Exemption

When requesting an HRA deduction, you must present the following documents:

  • You must present your PAN card information

  • A copy of the landlord's or property owner's PAN if the amount of rent you paid during a given financial year exceeds ₹1 lakh.

The rent receipts, which have to have the information below:

  • Date

  • Landlord name along with the landlord's PAN Card details has to be provided

  • The tenants name

  • Address of the rental property

  • Rental duration

  • A revenue stamp and the landlord's signature are required

  • The identical receipt is valid for three months

  • For Claiming the HRA benefits and valley you must provide at least four receipts

  • If necessary, a xerox or photocopy of the rental agreement

  • The employee may additionally pay his or her father's rent and be eligible for tax benefits connected to the House Rent Allowance (HRA).

How Much of My HRA Is Exempt From Tax?

According to income tax regulations, the HRA's tax-exempt portion must be at least one of the following amounts: Actual HRA portion of pay. If the applicant lives in Delhi, Chennai, Kolkata, or Mumbai, they will receive 50% of their base pay; in any other city, they will receive 40%.

Can I Claim HRA by Paying Rent to Parents?

Yes, one can claim the allowance and pay their parents' rent. The applicant and their parents must sign a lease and the applicant must send their parents money each month. One can save money on taxes while benefiting their parents in this way. Their parents must also include the rent paid in their income tax forms as income. By doing so one can effectively terminate the tax burden on the overall family income. This is applicable only if the other income is lesser than the basic exemption threshold or is perfectly taxed at a lower tax bracket.

What Should I Do if I Forgot to Submit the Rent Receipts to My Employer?

In this situation, you are eligible to claim the HRA tax benefit when you file your income tax returns. You will need to keep your rent payment receipts handy because the Income Tax authorities may need to see them in order to verify your claim.

What Should I Do if My Landlord Doesn’t Give Me His PAN?

A government announcement states that employees must now include PAN card information while submitting HRA claim forms. According to the government, if the annual housing rent exceeds ₹1 lakh, the landlord's PAN card information must be included on the exemption form. Under any circumstances if the landlord refuses to provide information or sign the declaration, the applicant can request the landlord's PAN card by writing to the income tax department and providing all the information related to the landlord's personal information.

Can I Claim HRA if I’m Also Claiming Home Loan Deductions?

The house loan interest paid by a single taxpayer can be deducted under the income tax Act. Every housing loan accepted for the acquisition, building, refurbishment, or reconstruction of a residential home is eligible for this interest deduction. The amount of the tax deduction is determined by the use for which the home has been used, i.e., whether it has been used for personal use or has been rented out.

A taxpayer may occasionally live in a rental residence while concurrently making mortgage interest payments. When a taxpayer commutes to work in a location other than his hometown or pays interest on a mortgage taken out to purchase or build a home for the taxpayer. You can be renting a home in one city while owning and paying down a mortgage on a home in a different city. Rent payments made through HRA are tax deductible. Additionally one can also deduct the interest paid on mortgage from your taxes. Tax deductions are available for principal payments on mortgages as well.

How Is Exemption on HRA Calculated?

Consider that you pay ₹15,000 in rent each month to live in Bangalore. Your base monthly pay is ₹70,000, plus ₹20,000 for health reimbursement allowance. Your HRA exemption limit in this situation will be determined as follows:

  • Actual HRA paid = ₹2.4 lakhs annually

  • 50% of the base wage = ₹3 lakhs

  • Extra rent paid each year that is greater than 10% of the base wage = ₹1.2 lakhs

  • The HRA exemption amount is ₹1.2 lakhs, while the remaining ₹1.2 lakhs are taxed.

Once you are aware of the HRA claim amount, utilise the appropriate ITR form and submit your ITR by doing the following:

  • In Form 16 - Part B, under ‘Salary as per requirements contained in section 17(1)’, enter your salary. The HRA determined above should be entered in the ITR 1 under ‘allowances exempt u/s 10’ (choose 10(13A) from the drop-down box).

You can simply claim your HRA exemption while submitting your ITR reports if you adhere to these HRA tax exemption requirements. Making a claim for HRA exemption is a fantastic method to lower your annual taxable income. Subsequently one can also make benefits by investing in insurance plans, retirement annuity plans and savings insurance.

How Is HRA Taxed?

Tax exemption for the entire HRA is not always guaranteed. The lowest of the following three will be considered to be tax-exempt:

  • HRA that your employer provided

  • Rent paid in whole less 10% of pay

  • 50% of the minimum wage for people who live in big cities

  • 40% of the base pay for persons residing outside of major cities

  • Your taxable salary is increased by the remaining HRA.

You can quickly determine your HRA exemption using the Vakilsearch HRA calculator. It is easy and fast to use. Now use Vakilsearch HRA calculator anytime anywhere now!

Frequently Asked Questions (FAQs)