House Rent Allowance (HRA) is a common allowance provided by employers in India to help employees manage the cost of renting a home. It’s a partly taxable allowance, meaning a portion of the HRA you receive is exempt from income tax, and the remaining amount is added to your taxable income.
HRA Exempted Rs.
How to calculate House Rent Allowance:
A specific portion of the HRA you receive is exempt from income tax under Section 10(13A) of the Income Tax Act, 1961. The least of the following three amounts is exempt from tax:
| For Metro cities (Delhi / Mumbai / Kolkata / Chennai) | Other citites |
| HRA Actually received | HRA Actually received |
| Rent Paid (-) 10% of salary | Rent Paid (-) 10% of salary |
| 50% of Salary | 40% of Salary |
Example:
Let’s say you live in a non-metro city and receive an HRA of ₹15,000 per month. Your basic salary is ₹50,000 per month and you don’t receive DA. Monthly Rent is ₹12,000 M Here’s how to calculate the exempt HRA:
| Computation of House Rent Allowance |
| Actual HRA | ₹15,000 |
| Rent paid (-) 10% of salary [₹12,000 (-) ₹5,000] | ₹7,000 |
| 40% of Salary (Non metro) | ₹20,000 |
Taking the minimum value, ₹7,000 is the exempt HRA amount in this example. The remaining ₹8,000 (₹15,000 – ₹7,000) is added to your taxable income.
Important Notes:
- You need to be paying rent to claim HRA exemption. Living in your own house or paying rent to close relatives might not qualify for the exemption.
- Proper records like rent receipts are crucial for claiming the exempt portion while filing your income tax return.