How To Calculate Your HRA

By BankBazaar | March 22, 2019

Learn all about how to calculate your House Rent Allowance (HRA) and how it can help you get some tax benefits as well.

How To Calculate Your HRA

There’s a good chance you have a lot of things on your mind when you receive your salary every month. If you have Credit Card payments to tend to or EMIs on loans, then you’re probably calculating your monthly expenditure keeping these things in mind. But, amidst all these calculations, you may be ignoring that one component in your salary slip – your HRA or House Rent Allowance

As long as you are paying rent, you can claim tax benefits on the House Rent Allowance component of your salary, while also availing tax benefits on your Home Loan. This could be the case if your own home is rented out or you work from another city etc. However, you need to account for any rental income you receive from the property you own under ‘income from other sources’.

Additional Reading: HRA Exemption And How To Claim It

HRA is provided to salaried people under Section 10 (13A) of the Income Tax Act, 1961, in accordance with rule 2A of Income Tax Rules., while self-employed professionals are eligible for tax deductions under section 80GG of Income Tax Act, 1961.

Dependent Factors

When you are calculating HRA for tax exemption, you need to take into consideration four aspects. This includes salary, HRA received, actual rent paid and where you reside, i.e. if it is a metro or non-metro.

If these aspects remain constant through the year, then tax exemption is calculated as a whole annually. If this is subject to change, as in a rent hike or shift in residence etc, then it is calculated on a monthly basis.

The place of residence is significant in HRA calculation since the tax exemption for HRA in a metro is 50% of the basic salary, while it is 40% for non-metros.

On Paying Rent

It isn’t mandatory that you should pay rent only to a landlord to avail HRA benefits. You can pay rent to your parents or your spouse to claim tax benefits as well. However, they need to account for the same under ‘income from other sources’ and will be entitled to pay tax for the same.

To claim HRA, you’ll need to furnish proof of rent paid through rent receipts to your employer. If you pay more than Rs. 1 lakh as rent annually, you’ll be required to provide the PAN of your landlord along with the rent receipts.

Additional Reading: Fake Rent Receipts Could Get You In Trouble

How Is HRA Calculated

To figure out how much HRA exemption you are eligible for, consider these three values:

  1. The actual rent allowance the employer provides you as part of your salary
  2. The actual rent you pay for your house, from which 10% of your basic pay is deducted
  3. 50% of your basic salary when you reside in a metro or 40% if you reside in a non-metro

The least value of these three values is allowed as tax exemption on your HRA. You can discuss restructuring your pay structure with your employer in order to avail the most of your HRA tax benefit.

Here is a sample illustration for your understanding:

Sunitha earns a basic salary of Rs. 40,000 per month and rents an apartment in Delhi for Rs. 20,000 per month (hence eligible for a 50% of the basic pay for HRA exemption). The actual HRA she receives is Rs. 25,000.

These values are considered to find out her HRA tax exemption:

  1. Actual HRA received, i.e. Rs. 25,000
  2. 50% of the basic salary, i.e. Rs. 20,000, and
  3. Excess of rent paid over 10% of salary, i.e. Rs. 20,000 – Rs. 4,000 = Rs. 16,000

The value considered for her actual HRA exemption will be the least of the above values. Hence, the net taxable HRA for Sunitha will be Rs. 25,000 – 16,000 (available HRA deduction) = Rs. 9,000.

Additional Reading: Should I Buy A House Or Continue Staying On Rent?

We hope that we’ve addressed all your concerns about HRA. Looking to buy a home for yourself? You may want to explore these Home Loan offers.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.
Category: Financial Planning HRA Tax
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34 thoughts on “How To Calculate Your HRA

  1. AvatarC.Venkata Krishna

    Thanks for the clarity.

    It will be greatful if you could clarify me the doubt. My employer pays HRA. I am living with my parents, which is Joint HUF. My father is willing to receive rent from me and also account the receipt in his taxable income underthe head income from other source.

    Can I pay the rent to him and collect the stamped receipt for claiming HRA exemption.

    Kindly clarify.

    Reply
    1. Avataradmin

      Yes, if you are a salaried employee and your parents own the house you can claim the tax rebate for HRA. You should submit receipts for the actual payment and be in a position to provide a copy of the lease agreement if a proof is demanded.

      Reply
  2. AvatarP.V. Krishna Murty

    Is Tax Deduction at Source (TDS) applicable while paying the rent to the owners? If so, up to what amounts of rent are eligible for TDS exemption? Is PAN number of the owner compulsory in the rent receipt?

    Reply
  3. AvatarDanny

    Hi,
    We live in metro city and our home loan property is in a non metro city. We do not have any rental income with it.

    We both are joint applicants in Home loan and home is registered in my wife's name. My wife is prevailing the home loan deduction in her tax profile and I am prevailing HRA benefits in my profile as I pay the rent for my Metro accomodation.

    Can we do so ? or there is any hindrence by law in it ?

    Reply
  4. AvatarSubramanian Ramachan

    i live in hyderabad. is it declared as metro city. can you please clarify this.

    Reply
  5. AvatarRaju

    To Subramani

    Hbad is not a Metro

    only 4 metros in india

    Delhi, mumbai, chennai and kolkatta

    Reply
  6. AvatarArindam

    I live in Gurgaon. whether its come under metro city gurgaon or not? As per ministry's circular, HRA paid to gurgaon as per delhi rate. Is the same will be applicable while claiming rebate?

    Reply
  7. AvatarArindam

    Dear Sir

    I am working in a private company in Gurgaon and staying at Gurgaon. The company gives me HRA @ 50% of my basic salary. While claiming rebate one of the rule of HRA rebate says 50% of salary for metro city and 40% of salary for non-metro city. (1) Whether Gurgaon comes under Delhi metro city or not? As per Ministry of India O.M. no 11023/1/86-E.II(B) dt. 09.12.86 where it says HRA/CCA at Delhi rates in Gurgaon. Whether the same for claiming tax rebate.

    If gurgaon comes under metro city I can get full HRA rebate, otherwiswe I can get 40%, (2) then is the rule of giving 50% HRA of Basic is justified?

    I will be obliged to get the reply soon. Thanks in advance

    Reply
  8. AvatarShridhar Chary

    The article " Are you calculating your HRA right?" posted on 16.06.09. The contents are understood but it needs to be confirmed whether the procedure is acceptable under the law i.e whether it is okayed by the tax experts of the site.

    Reply
    1. Avataradmin

      Please do consult with the auditor of your firm on how best to enable the tax benefits for you. The process detailed here is ofcourse acceptable by law but as far as how best to present it varies from company to company and depends on the individual company policy.

      Reply
  9. AvatarPuru

    I have two rented house, one in the city of my workplace (Ludhiana) other in another city (Delhi). Wanted to know whether I can claim HRA benefit against rent paid for the house which is located in Delhi though I work in Ludhiana.

    Please do the needful.

    Regards

    Reply
  10. AvatarSuneet

    I am having my own house, Which i have leased tomy company & compancy has given same house to me for living against my HRA. what are tax implication for the same. Do i have to pay tax on lease amount which i get as a owner as well as HRA.

    Regards

    Suneet

    Reply
    1. Avataradmin

      Technically you can, however since the lease and the rent reciepts are likely to be at the same address it may raise doubts if it comes under the scanner. Just have supporting documents in place for this probability.

      Reply
  11. AvatarSubbu

    Hi
    I am currently repaying EMI on home loan, Shall I eligible for HRA exemption?

    Thanks & Regards
    Subbu

    Reply
  12. AvatarSanjay Mukherjee

    How the rent paid to parents or spouce will be taxed in thier hand as " income from other sources" as suggested in the above discussion – please explain.

    There is an income head " Income from House Property" which covers rental income from House Property.

    Reply
  13. AvatarGurpartap

    I am working in a private company in Gurgaon and staying at Gurgaon. The company gives me HRA @ 50% of my basic salary. While claiming rebate one of the rule of HRA rebate says 50% of salary for metro city and 40% of salary for non-metro city. (1) Whether Gurgaon comes under Delhi metro city or not? As per Ministry of India O.M. no 11023/1/86-E.II(B) dt. 09.12.86 where it says HRA/CCA at Delhi rates in Gurgaon. Whether the same for claiming tax rebate.

    If gurgaon comes under metro city I can get full HRA rebate, otherwiswe I can get 40%, (2) then is the rule of giving 50% HRA of Basic is justified?

    I will be obliged to get the reply soon. Thanks in advance

    Reply
  14. AvatarAnonymous

    The HRA component is not included in the salary structure, could we take the HRA exemption

    Reply
    1. AbithaAbitha

      HRA (House Rent Allowance) is accounted for in the case of salaried people under Section 10 (13A) of Income Tax Act, 1961, in accordance with rule 2A of Income Tax Rules. As the HRA component is not part of your salary structure you cannot avail this. However,you can claim benefits on the house rent expenses incurred under section 80GG, which resembles section to 10(13A) but is subject to certain conditions.

      Reply
  15. AvatarSameer

    I own a apartment jointly with my mother.
    Can i Pay rent to my mother and claim HRA.

    Reply
  16. Avatarshalini

    sir, I am working in city Ambala, residing in chandigarh and taken home loan against home in city Zirakpur. Although zirakpur ( where i have purchased home) is nearer to Ambala (where I am working) yet residing in chandigarh in rented accomodation due to more facilities available here. I have also rented out ny own home in zirakpur. In the bove situation can I claim both HRA and home loan repayment benefits.

    Reply
  17. AvatarNaresh

    Is there any recent case law which says one cannot clain HRA and loss on House Property if the person is paying rent in and EMI in the same city?

    Reply
  18. AvatarDeepa

    Can a wife/husband pay rent to the other spouse (who owns the house) and claim HRA exemption on the basis of the rent receipt issued for the same ?

    Reply
  19. AvatarHarish

    I have one flat in Ghaziabad (Uttar pradesh) and paying its EMI and recently I bought a flat in Bangalore and paying its EMI. I work in bangalore and living in my own falt in Bangalore which I bought 2 months back. Can you please let me know how can I avail the maximum benefit of loan interest and HRA

    Reply
  20. Avatarrajender

    if i get property registered under my wife's name and take a jt home loan,am i eligible for IT rebate

    Reply
  21. Avatarprachi

    My parents are staying in rented house and rent is paid by me. can i get tax benifit for that. Prachi

    Reply
    1. AvatarFrancisca Lobo

      I think you can, Prachi. Is the rental agreement in your name? Just get the agreement in your name, it should be fine and you shouldn’t already be paying tax elsewhere.

      Reply
  22. Avataramit

    sir i missed to deposit my rent reciepts to my employer, due to which my HRA got taxable & my 50000/- has gone into income tax as extra amount. is there any wayout that now i can claim it for refund.

    Reply
  23. AvatarKishore

    Team

    My family stays in Bangalore and I stay in a different city and visit them during weekends. Can I claim HRA for both the locations as I pay rent at both the places.

    Reply
    1. AvatarTeam BankBazaar

      Hi Kishore, Thanks for writing to us. You can claim HRA only in the city of your employment. For more information on HRA, please click here. Cheers, Team BankBazaar

      Reply
  24. AvatarFrancisca Lobo

    Don’t know why the IT department has to make this so complicated. The first thing you do is look at the breakup of your salary. Then just look at these three things to understand under which you fall.

    To figure out how much HRA exemption you are eligible for, consider these three values
    1) The actual rent allowance the employer provides you as part of your salary
    2) The actual rent you pay for your house, from which 10% of your basic pay is deducted
    3) 50% of your basic salary when you reside in a metro or 40% if you reside in a non-metro

    To my knowledge, Bangalore is not considered to be a metro except for tax purposes. Is this true?

    Reply
    1. AvatarTeam BankBazaar

      Hi Francisca Lobo,

      As far as we know, Bangalore is considered a metropolitan city.

      Cheers,
      BankBazaar

      Reply
  25. AvatarChinmay

    If I have paid rent only for 6 months; then will the HRA factors i.e. HRA, Rent – 10% basic, 40%basic, be taken into account for 6 months only or for 12 months?

    Reply
    1. AvatarTeam BankBazaar

      Hi Chinmay, If you’ve paid rent only for 6 months, then HRA will be considered for 6 months only. You have to submit rent receipts as proof while claiming HRA. Cheers, Team BankBazaar

      Reply

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