📋 Calculation Breakdown
📊 Visual Comparison
💡 Tax Saving Tip
🏠 Complete Guide to HRA
House Rent Allowance – Tax Exemption Made Simple
🤔 What is HRA?
House Rent Allowance (HRA) is a part of your salary given by your employer to meet your house rent expenses. It also helps you save tax under Section 10(13A) of the Income Tax Act if you live in a rented house.
HRA is one of the most common and beneficial tax-saving components in your salary structure. It allows you to reduce your taxable income significantly if you’re paying rent for your accommodation.
📋 Conditions to Claim HRA Exemption
You can claim HRA tax exemption if you meet all the following conditions:
- You receive HRA from your employer as part of your salary
- You live in a rented house (not owned by you or your family)
- You actually pay rent to the landlord
⚠️ Important Note
- If you live in your own house, you cannot claim HRA exemption
- You must have proper rent receipts and rental agreement
- For rent above ₹1,00,000 annually, landlord’s PAN is mandatory
📐 HRA Exemption Rule
HRA Exemption Formula
The HRA exemption is the LOWEST of the following three amounts:
OR 40% of basic salary (for non-metro cities)
💡 Example: HRA Calculation
| Particulars | Amount (Monthly) |
|---|---|
| Basic Salary | ₹40,000 |
| HRA Received | ₹20,000 |
| Rent Paid | ₹22,000 |
| City | Delhi (Metro City) |
Step 1: Calculate All Three Components
Step 2: Choose the Lowest of the Three
| Component | Amount |
|---|---|
| Actual HRA Received | ₹2,40,000 |
| 50% of Basic Salary | ₹2,40,000 |
| Rent Paid – 10% of Basic Salary | ₹2,16,000 ⬅️ Lowest |
(This is the least among the three amounts)
= ₹2,40,000 − ₹2,16,000 = ₹24,000
(This ₹24,000 will be added to your taxable income)
📊 Final Summary
| Particulars | Amount (Annual) |
|---|---|
| Total HRA Received | ₹2,40,000 |
| HRA Exempted from Tax | ₹2,16,000 |
| HRA Taxable | ₹24,000 |
💡 Final Thoughts
📝 Key Takeaways
- Always keep rent receipts or rent agreement for claiming HRA
- If rent is more than ₹1,00,000 annually, provide landlord’s PAN
- HRA is a good way to reduce tax liability if you live in a rented house
- Metro cities offer higher exemption rates (50% vs 40%)
- Even if you don’t get full exemption, any amount exempted saves tax
- Consult a tax advisor for complex situations or salary restructuring
Pro Tip: Use our HRA Calculator tool to quickly compute your exemption and explore optimization strategies. The tool also provides scenario analysis to help you make informed decisions about rent and salary structure.