1. What is HRA Exemption?

HRA (House Rent Allowance) 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 amount is calculated as the least of three specified components.

2. How Does the Calculator Work?

The calculator uses the HRA exemption formula:

Where:

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

Explanation: The exemption is calculated as the minimum of these three values to ensure fair taxation.

3. Importance of HRA Exemption

Details: Proper calculation of HRA exemption helps in accurate tax withholding and prevents underpayment or overpayment of taxes. It's a significant tax-saving component for salaried individuals paying rent.

4. Using the Calculator

Tips: Enter actual HRA received, basic salary, rent paid, and select whether you live in a metro or non-metro city. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What cities are considered metro for HRA?
A: Typically Delhi, Mumbai, Kolkata, and Chennai. Other cities may be classified as metro based on population criteria.

Q2: Can I claim HRA exemption if I live in my own house?
A: No, HRA exemption is only available for rented accommodation. However, you may be eligible for other deductions.

Q3: What if my rent exceeds the HRA received?
A: The exemption is limited to the least of the three components, so you cannot claim more than your actual HRA amount.

Q4: Is rent receipt required for HRA exemption?
A: For amounts exceeding certain thresholds, rent receipts and possibly rent agreement may be required as proof.

Q5: How does this affect my tax withholding?
A: The exempt amount reduces your taxable income, thereby reducing the tax withheld from your salary each pay period.