Something you must know about HRA (House Rent Allowance) is – HRA Exemption Calculation, how the exemption is calculated for salaried employees, HRA exemption calculator in Excel using formula, exemption limit, exemption without PAN, HRA exemption without rent receipt and exemption section to save your Income Tax every year.
HRA full form is House Rent Allowance, which is one of the component in your salary slip that is provided to you to pay for your rent. HRA becomes your Taxable Income while you calculate your Income Tax. But if you stay on rent, you can claim the HRA component in your salary to reduce a specific amount based on calculations we will see in this post. This will help you save your Income Tax since your Taxable Income will be reduced. HRA exemption without PAN of landlord is possible when total rent paid by you is less than Rs. 1 Lac in FY and you cannot claim HRA exemption without rent receipt since it is the proof that you stay on rent. Download HRA Exemption Calculator in Excel below.
You can fill above form to download HRA exemption calculator in Excel.
You can also use the online HRA calculator below to know your deduction limits.
- HRA Exemption Calculator in Excel Video
- What is HRA
- Things to know about HRA
- Income Tax on HRA
- HRA Exemption in income tax
- Calculation Formula
- HRA Calculation Rules
- Tips & Tricks
- Frequently Asked Questions (FAQs)
HRA Exemption Calculator in Excel Video
What is HRA
- HRA full form is House Rent Allowance
- If you are salaried employee, you must be receiving HRA component. You can confirm this from your Salary slip of any month
- HRA is provided to you so that it helps you pay your rent if you stay in rented accommodation
- Not all of us stay on rent, so this HRA amount becomes taxable if you do not stay on rent
- But, if you stay on rent, you can claim HRA exemption to reduce your taxable income which will help save your Income Tax
- There are certain rules you need to follow along with HRA calculation formula you must use to calculate HRA exemption, because not entire HRA amount can be exempted from taxable income
We will see the HRA calculation formula below.
ALSO READ: Claim HRA without staying on Rent
Things to know about HRA
- HRA exemption limit is calculated based on your Basic Salary, HRA component and the rent you pay (calculations below)
- HRA exemption in new tax regime is not allowed since new tax regime contains reduced Tax slab rates. No deductions are allowed in new tax regime
- To claim HRA, PAN card of landlord is required only when you pay a total rent of more than Rs. 1 Lac in a Financial Year.
- HRA exemption without PAN is applicable only when total rent paid in FY is less than Rs. 1 Lac, or monthly rent paid is less than Rs. 8,333
- HRA exemption section is Section 10 (13a)
- HRA exemption without rent receipt is not possible since rent receipt are the proof that you pay rent. It is better to ask landlord to provide you rent receipt
- HRA exemption without HRA component in salary is also possible if you claim deduction under Section 80GG
- Remember, HRA exemption can be claimed only under Old Tax regime. HRA exemption under New Tax Regime is not allowed
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Income Tax on HRA
- As mentioned above, you can claim HRA exemption to save your Income Tax
- But if you do not stay on rent, your entire HRA amount becomes taxable
- Remember, you can only claim HRA exemption if you choose Old Tax Regime to calculate your Income Tax. New Tax Regime does not allow you to claim any exemptions or deductions. So, choose Old Tax Regime to calculate your income tax if you are claiming HRA
- Old Tax Regime also allows you to claim Standard deduction if you are salaried employee
- You can also take benefit of Tax Rebate u/s 87a if your Taxable income is below Rs. 5 Lacs (in FY 2022-23) using Old Tax Regime
Income Tax Calculation FY 2023-24 Video
HRA Exemption in income tax
- The amount you receive as HRA is not fully tax exempted
- The Tax exempt portion should be minimum of the following calculations:
1. Actual HRA received from employer
2. 50 percent of the ‘salary’ if the accommodation is in the metro cities (Delhi, Mumbai, Chennai, Kolkata) or else 40 percent for other cities
3. Excess rent paid annually over 10 percent of the annual ‘salary’
where Salary means “Basic Salary + Dearness Allowance”
- You can claim full HRA received in #1 only when the number is higher in #2 and #3 calculations above
- Let’s understand this with the help of examples below
Let’s consider below example of Rent, Basic Salary and HRA:
And below are the calculations based on above calculation formulas:
#2 calculation above is minimum of all 3. So you can claim Rs. 95,400 as HRA and reduce this amount from Taxable income to calculate your Income Tax using Old Tax Regime.
Let’s understand how we reached to this figure:
Actual Rent = Rs. 1,20,000
10% of Basic Salary = 10 * Rs. 2,46,000 / 100
10% of Basic Salary = Rs. 24,600
So Actual Rent minus 10% of Basic Salary becomes Rs. 1,20,000 – Rs. 24,600 = Rs. 95,400
This is how HRA calculation works.
ALSO READ: How to Calculate Income Tax using Salary Payslip
HRA Calculation Rules
Some rules you should follow while calculating HRA exemption:
- You should have receipts of all rent you have paid to landlord
- If rent for a financial year (April to March) is greater than Rs. 1 Lac, you need to submit PAN of landlord
- Optionally, it is also better to keep a copy of rent declaration with you
- HRA exemption is applicable only for those staying in rented accommodation
- If HRA component is not provided by your employer in salary slip, you can still claim HRA under Section 80GG
Tips & Tricks
- You can pay house rent to your parent (parent owning house) and reduce your taxable income
- While paying rent to parent, you should have digital proof of rent transfer from your account to parent account and the house must be in the name of your parent whom you are transferring the house rent amount
- Also, the rent you pay to your parent becomes taxable income while they calculate their Income Tax
- In case your parents are senior citizens, they can calculate income tax using this excel method
- In this way, you as a family save income tax together
- This method is more effective when your parent’s income is below exemption limit, so that even they don’t have to pay any income tax on the house rent income
So you can easily Download the HRA Exemption calculator in Excel using the form at the start of this article. If you stay on rent than this is the good opportunity to claim HRA and save income tax.
If you don’t stay on rent, than also you can claim HRA by staying with your parents, provided you keep the proofs of digital transfer and other related documents.
Some more Reading
- Old vs New Tax Regime Calculator in Excel
- All Deductions allowed for Tax Payers
- How to File ITR on Salary
- Rs. 1000 PPF Interest Calculation for 15 years
Frequently Asked Questions (FAQs)
What is HRA exemption limit?
HRA exemption limit is based on the calculations shown above using Basic salary, HRA component in your salary slip and the rent you pay
HRA exemption in new tax regime allowed?
Exemption in new tax regime is not allowed since new tax regime has reduced tax slab rates, and no deductions are allowed in new tax regime for you to save any more income tax
HRA exemption without PAN?
HRA exemption without PAN of landlord is possible when the total rent paid by you in FY is less than Rs. 1 Lac, or less than Rs. 8,333 per month. In case the total rent paid by you is more than Rs. 1 Lac in a FY (April to March), you need to provide PAN of landlord
What is HRA exemption section?
HRA exemption section is Section 10 (13a)
HRA exemption without rent receipt?
Exemption without rent receipt is not possible since rent receipt are the proof that you pay rent. It is better to ask landlord to provide you rent receipt
HRA exemption without HRA component in salary?
HRA exemption without HRA component in salary is also possible if you claim deduction under Section 80GG
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Income Tax Calculator App – FinCalC
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