HRA tax exemption calculation: HRA, short for House Rent Allowance, is a salary component provided by employers to assist employees in covering their rental expenses. The exemption for House Rent Allowance (HRA) is determined by considering
The following three factors:
Actual HRA received from the employer.
Rent paid by the employee for the rented accommodation minus 10% of the basic salary.
50% or 40% (depending on the city of residence) of the basic salary.
Among the three factors mentioned above, the tax exemption for House Rent Allowance (HRA) is determine based on the factor that yields the lowest value.
The remaining amount, if any, is then subject to taxation according to the applicable income tax slab rates for the employee.
HRA tax exemption calculation:
The calculation for the exemption can be summarize as follows:
HRA exemption = Actual HRA received – (Rent paid – 10% of basic salary) – 50% (for metros) or 40% (for non-metros) of basic salary
In this context, “basic salary” refers to the fundamental pay component of an employee’s salary.
To claim House Rent Allowance (HRA) exemption, it is essential for an employee to actually incur rent expenses for a rent accommodation.
And provide valid rent receipts as evidence of the payments made. Moreover, if an employee resides in a property they own themselves, they are not eligible for HRA exemption.
To Visit https://www.incometax.gov.in
