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HRA Calculator Income Tax

HRA Calculator Income Tax (Simplified Guide)

If you are salaried, your pay slip has a House rent allowance (HRA) which is most important. Your employer should provide HRA as compensation for your house rental expenses. However, you must be aware that you can also save tax on it. The HRA calculation depends on factors like your salary structure, actual salary, and the city in which you reside. If you are a salaried employee living in a rented place, you should do an HRA calculation that saves your tax. It helps in reducing your overall tax liability.

Let us know more about HRA Calculator Income Tax.

How is HRA calculated for income tax?

Your salary determines your HRA. As per the income tax rules, the tax-exempt is part of the HRA (House Rent Allowance). Your HRA calculation consists of the following factors.

  • Rent: The actual rent for your home. If you stay in a hotel, you can’t claim HRA. You should submit rent receipts, bank statements, and lease agreements for proof.
  • Salary: Your HRA depends on your different salary components as basic salary, Dearness allowance (DA), and special allowances.
  • Residence: Your city decides your HRA. The HRA should not exceed 50% of your basic salary if you live in a metropolitan city. It is 40% of your basic salary if you reside in a non-metropolitan.
  • HRA from the Employer: The actual HRA from your employer is a prominent factor in calculating HRA deductions.

Based on these factors, you can calculate your HRA.

You need to enter your basic salary and HRA you get as per your salary slip. Enter your actual rent and specify whether you live in a metro city. Based on this information, you can determine your HRA for income tax.

HRA calculation 7th Pay Commission

Central Government employees come under the 7th pay commission. The calculation of their HRA depends on the cities they live in.

Indian cities are classified according to the population for House Rent Allowance (HRA) to Central Government Employees:

  1. X Class Cities (Above 50 Lakh Population): 27% of Basic Salary for HRA.
  2. Y Class Cities (5 to 50 Lakh Population): 18% of Basic Salary for HRA.
  3. Z Class Cities (Below 5 Lakh Population): 9% of Basic Salary for HRA.

Based on this categorization, HRA calculation is done for 7th-pay commission employees.

How much HRA is tax exempt?

50% of your basic salary is eligible for HRA tax exemption if you live in the metro city. Delhi, Mumbai, Calcutta, and Chennai are the metropolitan cities of India. If you live in any other place, 40% of your salary is eligible for HRA exemption.

How much HRA can I claim without receipts?

It is always advisable to have your rent receipts, agreement, etc, while you claim HRA. However, if your HRA is up to Rs.3000 per month, you can claim it without receipts. 

If the rent amount is between Rs. 3001 and Rs. 8333 per month, you should produce the rent receipt with a revenue stamp of Re. 1 and the owner’s signature.

 If the rent exceeds Rs. 8333 per month, you should produce the rent receipts with the revenue stamp of Re1, the owner’s signature, and his PAN card.

If the owner does not possess a PAN card, you must get a declaration that should include the reason for not having a PAN card, address, communication number, and name. 

Do we need to submit proof for HRA?

Yes, you should submit proof for claiming HRA. 

You should submit the following documents to claim tax exemption on HRA: 

Proof of rent payment: 

The main document you should provide to claim HRA tax exemption is the rent receipts to the rental agreement. You can provide bank statements if you do not have rent receipts. You are eligible for this exemption even if you pay rent to your parents.  

Bank Statements:

 If you fail to have rent receipts with your rental agreement, you should provide bank statements.

PAN card of your landlord:

 You should submit your rent receipts to avail of tax exemption on HRA. If the annual rent of the housing unit exceeds the mark of Rs.1 lakh, you should provide the PAN Card details of the landlord. 

Self-declaration form: 

If the landlord does not have a PAN card, you can provide a self-declaration quoting the same. 

You will need these proofs while claiming an HRA exemption.

Can I claim HRA if I live with my parents?

Yes, you can claim HRA. If you live with your parents, you can pay rent to your parents and save tax on HRA.

  1. You can transfer the money (rent) to your parent’s bank account or pay via a cheque. This way, you will be able to claim your HRA deduction properly.
  2. As you pay rent to owners, your parents must own the home. One or both of your parents may own the home. In the case of joint house ownership, you can deposit the money to any of the parents.
  3. Remember that you cannot be an owner or co-owner of this property since you cannot claim tax exemption on rent paid to yourself.

Documents required to claim the HRA while staying with parents:

  1. You can make a simple rental agreement with your parents.
  2. You can prepare rent receipts and submit them to your HR/payroll department. 
  3. You need to keep proper records as they may require at any time.

FAQ:  HRA calculator income tax

1. Can I claim HRA if I own a house?

If you own a house and live in your own house, you cannot claim HRA for it. That is not possible. If you own a home but live in rented accommodation in a different city, you can claim HRA for your rent.

There may be cases where you should move to a different city for your job and rent a home. You may also have your own house in other cities. In such cases, you can claim HRA for the rent you pay even if you own a house. However, you cannot claim HRA if you reside in your home.

2. How much HRA can I claim without PAN?

You can claim HRA without the owner’s PAN when your annual rent payment is less than Rs 1,00,000. However, you should provide your landlord’s PAN when your rent exceeds Rs 1,00,000.

3. What if I forgot to declare HRA?

You will have your HRA component in your salary that will come under Form 16 at all costs. While filing your ITR, you may have to upload your Form 16 which means your HRA exemption goes in without saying. In case you fail to add an HRA exemption while filing your ITR, you can file a revised return with your HRA included. You will receive your TDS refund soon.

If you fail to declare your rent to your employer, it would not be available in Form 16. You can claim HRA u/s 10(13A) when your employer gives a separate component towards HRA. If it is not available, you can claim for rent paid under Section 80GG.

Bottom line

House Rent Allowance is an important component in your salary that helps to save your tax. The HRA calculation depends on factors like your salary structure, actual salary, and the city in which you reside. If you are a salaried employee living in a rented place, you should do an HRA calculation that saves your tax. Thus, you can claim a deduction for the rent you pay.

By HRA Calculator Income Tax, it can greatly simplify the process of calculating tax exemptions on HRA and help individuals maximize their tax savings. By accurately estimating tax liabilities, individuals can effectively plan their finances and reduce their tax burden.

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