Being a salaried employee, your employer pays you the House Rent Allowance, better known as the HRA. This is a component of your total earnings that offers you compensation towards your rental expenses and also offers you exemption from taxation. Depending on whether you live in a rented or an owned accommodation, HRA is partially or fully exempted. Despite being a basic aspect of the salary, there are many who are not very familiar with the HRA exemption and its calculations. Read on to understand how to use the HRA calculator for HRA exemption.
HRA Exemption
There are a number of factors that can affect the HRA that you receive such as your salary structure, the city you reside in etc. keep in mind that the HRA that you receive is not fully exempt. If you do not live in a rented house, you will still be eligible for the HRA, however, the entire amount would be taxable. The minimum of the following will be considered for HRA exemption:
- If you live in a metro city - 50% of your basic salary
- If you live in a non-metro city - 40% of your basic salary
- HRA that you receive from your employer
- Total Rent MINUS 10% of your salary
HRA Exemption - Eligibility
It should be noted that every salaried employee may not be able to claim tax benefits. There are certain eligibility factors that you need to fulfil in order to claim HRA exemptions.
- You are a salaried employee
- You have the HRA component in your salary given by your employer
- You pay House Rent
- You do not own any residential property in the same city
- You do not receive rent from any property that you own (a family member can receive it on your behalf)
HRA Exemption - Things you should know
When calculating your HRA exemption, there are certain points that you must keep in mind, these are as follows:
- The HRA that is allocated cannot be more than 50% of the basic salary
- The entire rental amount cannot be claimed, the least of the three provisions (explained above) can be deemed
- You can claim tax benefits along with your home loan tax benefits
- If you live with your parents, you can pay them the rent and claim HRA
HRA Calculator
An HRA calculator is an online service that allows you to calculate the amount of HRA exemption that you are eligible for. Using an HRA calculator is quite simple, you simply need to follow the steps given below:
- Go to the ETMONEY HRA Calculator, you will be asked to enter a few details such as:
- Your basic salary
- HRA that you receive
- Rent that you have paid
- Your place of residence
- Your tax slab
- Once you fill in these details, click ‘Calculate’. In a few moments only, the calculator will display the exemption.
- You would be able to calculate the exemption on taxes and you can then pay the required tax amount correctly.
Using an HRA calculator comes with a set of benefits, let us take a look:
- The calculator can help you make the calculations in a few seconds
- It is an online tool that is free of charge, no matter how many times you use it
- The calculator does not make errors or mistakes. Just make sure you fill in all entries correctly
- Tax exemptions can be made based on the calculations
- It is able to take into account all the variables that go into the calculation of the HRA
Make use of the ETMONEY HRA calculator, and claim your HRA exemption right away.