If you're a salaried individual, you can claim House Rent Allowance (HRA) to meet your rented accommodation-related expenses. Salaried individuals who live in a rented house can claim this exemption and bring down their taxes.HRA can be fully or partially exempt from tax. Our HRA exemption calculator will help you calculate what portion of the HRA you receive from your employer is exempt from tax and how much is taxable.
If you don't live in a rented accommodation but still get house rent allowance, the allowance will be fully taxable.
How much of my HRA is exempt from tax?
The entire HRA received is not always fully exempt from tax. The least of the following three will be taken to exempt from tax:
- HRA received from your employer
- Actual rent paid minus 10% of salary
- 50% of basic salary for those living in metro cities
- 40% of basic salary for those living in non-metro cities
The remainder of your HRA is added back to your taxable salary. Our calculator can easily help you figure out your HRA exemption.
For example, let's consider the following scenario:
Raghu lives in Mumbai
He receives a HRA of Rs 1 lakh from his employer.
His basic salary per month is Rs 50,000.
Further, he has taken up an accomodation for which he pays a monthly rent of Rs 15,000.
What is the quantum of HRA exemption he can claim?
| Sl. No. | Head | Calculation | Amount |
|---|---|---|---|
| 1 | Actual HRA received from employer | 100000 | |
| 2 | Actual Rent Paid (-) 10% of salary | (15000*12) - 10% (50000*12) | 120000 |
| 3 | 50% of Basic Salary | 50% (50000*12) | 300000 |
| Least of the above | 100000 | ||
| Hence, Raghu would be eligible for a HRA exemption of Rs 1 Lakh. | |||
Can I claim HRA by paying rent to parents?
A large number of salaried individuals live in their parents' home, not in a rented accommodation. If you are given house rent allowance and live with parents, you can still get exemption on it by showing that you pay rent to your parents. To avail this exemption, your parents must be the owners of the house and they must show the rent you give as rental income in their income tax returns.
What should I do if I forgot to submit the rent receipts to my employer?
The good news is that HRA can be claimed directly on your income tax returns. If you didn't submit rent receipts to your company HR at the time of proof submission, you can claim HRA later on when you file your income tax returns. To claim this, adjust your taxable income to include HRA and calculate tax that is payable on the lowered taxable income. You will then be able to claim a refund if tax has been deducted in excess.
What should I do if my landlord doesn't give me his PAN?
Your landlord's PAN is mandatory if you want to avail HRA exemption and you pay rent of over Rs 1 lakh a year. There is no way around this.
Can I claim HRA if I'm also claiming home loan deductions?
Yes, you can. If you're a homeowner and you are paying back your home loan, you can also claim HRA if you live in a rented property. You are allowed to avail both the benefits to lower your taxable income.