How to Calculate House Rent Allowance – HRA

House Rent Allowance (HRA) is provided by employer to employee as a part of consolidated Salary or you can say Cost to Company (CTC) to meet rent of accommodation. HRA is exempted up to some extent as per section 10(13A) of the Income Tax Act, 1961 and Rule 2A hence it is necessary to understand that How to Calculate House Rent Allowance – HRA.

Minimum of following three amounts is available as HRA exemption:

  1. Actual House Rent Allowance provided by employer to employee.
  2. House Rent paid in excess of 10% of Salary.
  3. 50% of Salary in case House is located in Metro cities (Mumbai, Delhi, Kolkata, Chennai) or 40% in case of any other cities.

Important Definitions:

Relevant Period: For all three conditions mentioned above relevant period is very important. Means if there is any change in Salary, HRA paid to employee, location of rented house and actual rent paid by employee HRA need to calculate from that relevant change Hence one should avoid calculating HRA on annual basis if there is any change in above factors.  ( Download HRA calculator)

Salary: Meaning of Salary for calculating HRA (Basic Salary + Dearness allowance if terms of employment so provide + fixed percentage of turnover achieved by employee)

Important Points:

  1. Salary is to be taken on due basis for calculating HRA.
  2. If employee has not paid rent, no HRA exemption is allowed.
  3. If employee is leaving in his own house, no HRA exemption is allowed.
  4. Employee requires to submit rent receipt to employer with details regarding Name of Land Lord, address of property, period and mode of payment.
  5. Rent Receipt should be duly signed in with one rupee revenue stamp.
  6. Employee should deduct TDS @10% from rent paid to land lord  if rent paid  is in excess of Rs. 180000 during the financial year.
  7. Employee should quote PAN number of land lord in Form No.12BB to employer if rent paid is in excess of Rs.100,000

Example:

For Financial Year 2015-16

Mr. Sachin  is drawing basic salary Rs. 80000 p.m.

Dearness allowance Rs.8000 p.m. which is form part of retirement benefits.

HRA received Rs. 25000 p.m.

He pays rent of Rs. 20000 p.m. in Mumbai.

Answer:

Minimum of Three is allowed as HRA exemption:

1. Actual HRA Received ( 25000 x 12) 300000
2. Rent paid in excess of 10% of Salary ((20000 x12)- 10%(1056000)) (Note-1) 134400
3 50% of Basic salary (50% of 1056000) 528000

Hence Rs.134400 is allowed as HRA exemption and Rs. 165600 (300000-134400) is taxable HRA.

Note-1

Salary for  HRA Calculation

1. Basic Salary ( 80000 x 12) 960000
2. Dearness Allowance ( form part of salary benefit( 8000 x 12 ) 96000
Total Salary for HRA calculation 1056000

HRA Calculator:

Very useful and simple House Rent Allowance (HRA) Calculator to calculate HRA. Annual and Monthly HRA option is available in Calculator.

Click here to Download HRA calculator

 

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18 comments on “How to Calculate House Rent Allowance – HRA
  1. Madhuri says:

    If emplyee live in own house, And he/she pay for this house/property tax also. Then any tax exemption (rebate) for tax already paid as property tax Or house maintainence cost annualy and ects.

  2. ankur says:

    If an indvidual stays in city A in an owned house and his wife is staying with his parents in city B.If indvidual pays rent to his parents, can he claim it under HRA

  3. kota karthik says:

    i want how to caculated hra

  4. MURUKESH says:

    ITs very useful

  5. Ritesh says:

    Sir

    How to caluclate HRA

    salary per month 50000 * 12 = 600000
    actualpaid rent 20000 per month

    what is exactaly take HRA exemption

    pls. help me

    Thanks
    Ritesh

  6. leelakumar says:

    Its not calculating for the remaining months in the same format.
    from may month on words formula is different is given

    Particulars/ Financial Year Apr May
    Actual HRA Received – (A) 5,600 5,600
    Rent Paid 8,000 8,000
    Basic Salary 10,208 10,208
    Dearness Allowance (if forms part of salary) 1,100 1,100
    Commission as fixed percentage of turnover achived by employee –
    Total Salary for HRA calculation 11,308 11,308
    10% of salary 1,131 1,131
    “Rent paid in excess of 10%
    of salary -(B)” 6,869 6,869
    (Metro -50 %/ Non Metro – 40% ) of Salary- (C ) 5,654 4,523
    HRA Exemption (Lower of A,B & C) 5,600 4,523
    HRA Taxable – 1,077

  7. Ganesh says:

    Thank you for the Post. HRA calcualtor tool works fine and clearly explains the method of HRA calculation.

  8. VIJAY PATIL says:

    my anual salary rs.306000. pl send hra calculation

  9. prajapati Arch says:

    sir
    how to calculation of HRA and DA please Explain me how to?

  10. JEDHE MACHINDRA DILIP says:

    MY ANNUAL SALARY = 457596/- PLEASE SEND ME HOW TO CALCULATE HRA & TDS

  11. Vijay Kumar says:

    What is the ceiling, for not producing the rental receipt for an Individual tax payer

  12. anupama says:

    How to calculate basic nd da? Hra is calculated 40% on what? V r staying in rent house , my hubby gets hra 50% of his basic. His pay slip is like this basic rs 24, 727 , others 1500, hra 19782, da 19782, tds add 6000, soft furnishings 2060 nd medical 1250. So his gross pay is 75101 , net pay 57434. And the deductions are pt 200, Pfizer 2976, tds 14500. Note my son studies in my hubby’s school, I don’t know bat children education allowance. Plz answer for basic, da, tds and, tks deductions, cea, rest all I know. Tq kindly help me

  13. Prerna Kumar says:

    Hi All,

    I have following questions related to Salary calculations:

    i) Does the basic component varies from organisation to organisation.
    ii) On what amount TDS is calculated?
    iii) What is % of Travelling Allowance,Fuel Allowance, Telephone Allowance, uniform allowance and Children’s education? And on which amount it is calculated?

    Thanks in advance 🙂

  14. Sucheta Talukdar says:

    10%of basic pay + Da or 10% of only basic pay is correct in HRA calculation..please inform.

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