HRA Calculation

Full form: House Rent Allowance Calculation

Tax & Deductions

HRA (House Rent Allowance) exemption reduces your taxable income if you pay rent and receive HRA as part of salary. The exempt amount is the LEAST of three calculations. For metro city renters in the 30% tax bracket, HRA exemption can save Rs 30,000-1,00,000+ per year.

In detail

HRA exemption = Minimum of three amounts:n1. Actual HRA received from employern2. Rent paid - 10% of Basic salary (annual)n3. 50% of Basic salary (metro cities: Mumbai, Delhi, Chennai, Kolkata)n OR 40% of Basic salary (non-metro cities)nnImportant: Landlord PAN mandatory if annual rent exceeds Rs 1L. Submit rent receipts + landlord details to employer by January-February to claim exemption in TDS calculation.nnFor HRA in old regime only. New regime: HRA exemption NOT available.

Formula

HRA exempt = Min(Actual HRA, Rent paid - 10% of Basic, 50%/40% of Basic)nAnnual HRA savings (30% bracket): HRA exemption x 30%

Real-life example

🇮🇳 India example

Priya: Basic Rs 60,000/month, HRA Rs 24,000, rent Rs 25,000/month. Metro city.n1. Actual HRA: Rs 24,000/month = Rs 2,88,000/yearn2. Rent - 10% of basic: Rs 25,000 - Rs 6,000 = Rs 19,000/month = Rs 2,28,000/yearn3. 50% of basic: Rs 30,000/month = Rs 3,60,000/yearnHRA exempt = Rs 2,28,000 (minimum). Tax saving at 30% = Rs 68,400/year.

Frequently asked questions

Can I claim HRA exemption and home loan interest deduction simultaneously? ▼

Yes. If you own a house in another city but rent in the city where you work: HRA exemption for rent paid (work city) + Section 24 interest deduction (owned house in another city) both allowed simultaneously. Both deductions available only in old tax regime.