1. What is HRA Exemption?

The House Rent Allowance (HRA) exemption is a tax benefit available to salaried individuals who receive HRA as part of their salary and pay rent for their accommodation. The exemption is calculated as the minimum of three amounts specified under the Income Tax Act.

2. How Does the Calculator Work?

The calculator uses the HRA exemption formula:

Where:

• Actual HRA — The HRA amount received from employer
• 50% or 40% of Salary — Depending on metro or non-metro city
• Rent minus 10% of Salary — The excess rent paid over 10% of salary

Explanation: The exemption is calculated as the least of these three amounts to determine the tax-free portion of HRA.

3. Importance of HRA Calculation

Details: Accurate HRA exemption calculation helps in proper tax withholding and prevents underpayment or overpayment of taxes. It's an important component of salary structuring and tax planning.

4. Using the Calculator

Tips: Enter actual HRA received, basic salary, rent paid, and select city type (metro or non-metro). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What cities are considered metro for HRA purposes?
A: Typically Delhi, Mumbai, Kolkata, and Chennai. Other cities may be classified as metro in some cases.

Q2: Can I claim HRA exemption if I live in my own house?
A: No, HRA exemption is only available for rented accommodation.

Q3: What if my rent exceeds the HRA received?
A: The exemption is limited to the least of the three calculated amounts, which may be less than your actual rent.

Q4: Are rent receipts required for claiming HRA?
A: Yes, you should maintain rent receipts as proof for tax filing, though not needed for withholding calculations.

Q5: How does this affect my tax withholding?
A: The exempt amount reduces your taxable income, resulting in lower tax withholding from your salary.