HRA Calculation

What is HRA?

HRA stands for House Rent Allowance, which often forms a critical taxable component of salary slips. It refers to the amount paid by an employer to their employee to meet the cost of living in rented accommodation. HRA helps you manage the expenses incurred on a rented house and enables you to save on your total tax outgo.


What is the eligibility criteria of HRA?

The eligibility criteria for HRA is:-

  • It would be best if you were a salaried individual.
  • You should receive HRA as a salary component.
  • You should live in a rented apartment.
  • You should be paying house rent, i.e., the rent receipts should be issued in your name.

How is the HRA Calculated?

The tax deduction that can be claimed over HRA is the least of the following:

  • Actual rent paid minus 10% of the basic salary
  • Actual HRA offered by the employer
  • 50% of salary when the residential house is situated in Mumbai, Delhi, Chennai or Kolkata; 40% of compensation when the residential house is situated elsewhere.


How is HRA calculated in salary?

  1. HRA received from your employer.
  2. Actual rent paid minus 10% of salary.
  3. 50% of basic salary for those living in metro cities. 40% of basic salary for those living in non-metro cities.

How much is HRA exempt from tax?

HRA exemption is allowed as least of the below:
  1. Actual HRA received by the employee.
  2. 40 % of salary for non-metro city or 50 % of compensation if the rented property is in Metro cities like Mumbai, Delhi, Kolkata and Chennai.
  3. Actual rent paid less than 10% of wages.

How much HRA can we claim?

50% of the employee salary is eligible for HRA tax exemption if they live in any of the Metro cities of India.
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