House Rent Allowance (HRA) Calculation
WHAT IS HRA ?
House Rent Allowance or HRA is a part of the salary provided by an employer to his employee for his rented accommodation. It forms part of the salary paid by the employer to their employee.
How is Exemption on HRA calculated ?
Mentioned below are the 3 provisions based on which the actual HRA is calculated. The lowest amongst these 3 HRA calculations is considered for deduction.
- The HRA amount received from the employer
- Actual amount paid for rent minus 10% of basic salary
- 50% HRA if the employee is staying in a metro city and 40% HRA for non-metro cities
Same Calculations are shown in Software also.
Example :
| We can use a example of Person A to identify the HRA payable. If we consider that he lives in Delhi at accommodated premises for which he has to spend Rs 12,000 every month, the following is his pay structure breakdown based on our HRA calculator. | |
| Salary component | Total amount (each month) |
| Basic salary | Rs 23,000 |
| HRA | Rs 15,000 |
| Conveyance allowance | Rs 3000 |
| Medical allowance | Rs 1250 |
| Special allowance under other heads | Rs 2300 |
| Adding the components, we identify that Individual A has a monthly salary of Rs 44,500. | |
| Based on the three heads mentioned above, using our HRA allowance calculator, the figures that are churned out are: | |
| Actual rent paid minus 10% basic or Rs 9700 | |
| HRA the employer offers is Rs 15000 | |
| 50% of the basic salary is Rs 11,500 | |
| Since the least of these 3 sums is calculated as HRA, Individual A has to pay Rs 9700 as HRA. It will be exempted from his taxable income. | |