Excempted Tax: ₹ 0
Taxable HRA: ₹ 0
HRA, or the House rent allowance, is essential in every salaried person's life. HRA is an allowance the employer offers to its employees as compensation for the house rent paid by the employees. HRA is a component of the employee's salary. All the salaried employees who live in rented accommodation can show it as proof to save on their taxes.
With the help of the HRA calculator, you can determine what portion of your HRA will be tax exempted and on what percentage you will need to pay the taxes.
How much HRA is exempted, and how is it calculated?
This article is for you if the entire HRA will be tax exempted. The whole HRA amount that your employer offers you is not permanently exempted. Nonetheless, it would be ideal if you focused on the least important of the following three:
- HRA received from the employer.
- 10% dedication from the salary from the actual rent paid.
- For people living in metro cities, 50% of the basic salary.
- For those living in non-metro cities, 40% of the basic salary.
Once you consider the least three, the remaining amount is added to your salary as taxable income.
How is HRA taxed?
Let's understand this with an example:
Employee A stays in New Delhi and receives Rs. 1 lakh as HRA from his employer. His per month basic salary is Rs. 50,000, and his rent for his house is Rs. 15,000. Now, let's figure this out from the above statements.
HRA from employer - 1,00,000
Actual rent - 10% - (15,000*12 = 1,80,000) - 10% (50000*12 = 6,00,000, that will be 60,000) = 1,80,000 - 60,000 = 1,20,000
50% of the basic salary since he is staying in a metro city - 50% (50000* 12 = 6,00,000 and 50% will be 3,00,000)
So, the equation will be
10% minus the rent paid
50% of the basic salary
HRA deduction = Least of the three
So, A will get an exemption of Rs. 1,00,000 from his salary under section 10 (13A).
How can an HRA calculator help?
The first criterion to fulfil for using an HRA calculator is that the employee needs to be a salaried one and not a self-employed individual. Additionally, it would be best to have your HRA as a part of your salary exceeding 10% of your salary. Once all these conditions are met, you can use the HRA calculator for the following reasons:
- With the help of the HRA calculator, you can determine which cities are more expensive to reside in and which are not.
- The HRA exemption calculator will also help you understand how much tax you must pay.
- Once you know the amount you will need to pay as tax, planning for things you wish to do will be easier.
Moreover, with the help of the HRA calculator, you will never have calculation errors as it is straightforward. First, enter the HRA amount and the basic salary from your salary slips and then scroll down to choose meteor or non-metro city. Then, the calculator will make all the calculations and tell you the amount you must pay as tax.
Every salaried person worries about the tax they must pay at the end of the financial year. However, most of the time, we still determine the amount and are left with a meagre salary after all the tax deductions. In such cases, you can have an unplanned month and bills to take care of. To avoid such chaos, use an HRA calculator to determine how much tax you must pay and how much will be exempted under HRA.