HRA Calculator

What is an HRA Calculator?

House rent allowance (HRA) is one of the most important parts of anyone’s salary. All employers are obligated to include a house rent allowance in order to compensate for the employees’ living expenses. However, a little known fact about HRA is that you can actually use it as a tax-saving instrument. The amount of HRA is determined by taking into account several factors, like the employee’s city, salary structure, salary, etc. If you are a salaried individual residing in rented accommodation, you can use the Urban Money HRA calculator to calculate your tax liability.

HRA in New Tax Regime

According to the new tax regime, even if HRA is not a part of the employee’s salary, they can claim a tax deduction on the rent. In order to claim this benefit, the taxpayer is not required to have their own house in the city where they are living on rent.

Further, if the taxpayer was employed for part of the year, and for the other part they have received HRA as part of the salary, the taxpayer has the right to claim a more beneficial deduction. The taxpayer will be required to choose between the 80GG exemption or HRA exemption. However, the authorities reserve the right to contest this decision.

Tax Benefits of HRA

The House Rent Allowance received by an employee can be used to offset the total tax liability for the year. This tax benefit is only applicable if the taxpayer is living in rented accommodation. If the taxpayer resides in their own home, then the HRA amount is completely taxable.

If you are a self-employed professional or businessman, then you are not eligible to claim this benefit. Only salaried employees who live in a rented accommodation and receive HRA as part of their salary are eligible to claim this deduction.

How to Calculate Exemption on HRA

Let us take a look at the standard hra exemption formula used to calculate the amount of HRA payable. While calculating the HRA component, salary is considered to be the sum of the basic amount plus Dearness Allowance, and other variable factors.

In order to calculate HRA, the lowest of the below given amounts is considered to be eligible for deduction:

• Actual HRA offered by the employer
• For people living in metropolitan cities: 50% of (Dearness Allowance + Basic Salary)
• For people living in non-metropolitan cities: 40% of (Dearness Allowance + Basic Salary)
• Any rent paid exceeding 10% of the annual salary

For instance, if a person living in a metro city gets a salary of Rs. 5 lakhs per annum, with the HRA component being Rs. 90,000 per annum. Let’s assume the actual rent paid for the year was Rs 1.2 lakhs, then the HRA benefit would be the lowest of:

• HRA received: Rs. 90,000
• 50% of (Dearness Allowance + Basic Salary): Rs 2.5 lakhs
• Any rent paid exceeding 10% of the annual salary: Rs 1.2 lakhs – 50,000 = Rs 70,000

So in this case, the HRA amount eligible for exemption would be Rs. 70,000.

Documents Required to Claim Tax Exemptions on HRA

In order to claim the HRA tax exemption, the taxpayer is required to submit the rent receipts or rent agreement provided by the landlord. If the annual rent paid amounts to over Rs. 1 lakh, you will be required to submit a copy of the property owner’s PAN card.

In a bid to tackle the problem of people claiming exemptions with fake rent receipts/rent agreements, the Income Tax authorities have passed new rules and regulations. According to the last Budget announcement, any HRA benefit of over Rs. 50,000 a month will be subject to TDS at the rate of 5%.

How to use the HRA Calculator?

The Urban Money HRA Calculator is actually pretty easy to use. You can use our calculator by following the below given steps:

Step 1: Enter your salary and HRA as per your salary slip.

Step 2: Enter the rent paid during the financial year and state whether you live in a metro or non-metro city.

Benefits of Using the Urban Money HRA Calculator

Using the Urban Money HRA calculator saves you the trouble of having to manually calculate your HRA tax exemption. Given below are some of the benefits of using our powerful AI-backed HRA calculator:

• The calculator is absolutely free to use and always provides accurate results.
• You can easily compute your eligible HRA tax deductions.
• Finally, our clever calculator takes into account various different variables in the HRA computation.