If you earn a salary and receive a house rent allowance (HRA) as part of the salary, then you qualify to claim tax exemptions on the rental payment. This HRA amount differs according to the city you reside in, and employers take the living cost of that particular city into account. Section 10(13A) of the IT act defines the rules for claiming tax benefits from the taxable salary, and you can use a calculator to compute the amount. The HRA calculator rules it follows are the same as per the above section of the income tax act.
What is a House Rent Allowance Calculator?
Financial websites in India have a wide variety of online calculators that may make figuring out this tax deduction item quick and easy. Before calculating your HRA, HRA calculators online will ask for information regarding your pay, allowing the tool to keep the HRA formula correct. The ordinarily complex process of calculating tax exemptions is made simpler with the help of this online calculator.
Guidelines for HRA Tax Exemption Calculation
The HRA deduction calculation from your annual taxable income amount that you are eligible to claim as a salaried employee depends on which one of the following requirements has the lowest value:
- The entire HRA amount is a part of your pay from your employer.
- The actual rent you pay is less than 10% of your pay.
- If you live in a metropolitan city, you can claim 50% of your pay.
- If you live in a non-metropolis city, you can claim 40% of your pay.
How to Calculate House Rent Allowance Online Using a Calculator?
You can follow the below steps to use this HRA calculator on the official web portal of the IT department:
Step 1: Scroll down to the “Important Links” area on the main home page and select the link labeled “Tax Calculators.”
Step 2: A variety of tools are available on the next page, but you must select the House Rent Allowance Calculator to utilize the tool.
Step 3: After the tool opens, the “Basic Salary” section requires you to input a figure based on the component shown on your pay slip.
Step 4: The “DA forming part of salary” field refers to the value from your salary slip’s Daily Allowance (DA) component, and you must enter the value in the HRA calculator income tax.
Step 5: Enter the commission you earn as it appears on your pay stub in the “Commission (as% of turnover reached by the employee)” field.
Step 6: To calculate your HRA deduction, enter the house rent allowance you get in the “HRA Received” box.
Step 7: Enter the rent you pay for the rented property in the box labeled “Rent Paid.”
Step 8: In the last step, either click the box labeled “Tick if yes” in the “Tick if resident in metro city” field if you currently live in a metro city or leave it blank in the HRA exemption calculator.
Step 9: After clicking the “Calculate” button, you will see the “Exempted and Taxable House Rent Allowance” numbers, which you may use to calculate your taxes.
Advantages of Using Online HRA Calculator
Using an online calculator for computing the HRA exemption and the taxable amount has multiple advantages, as follows:
- Compared to a manual process of calculating the HRA, this tool will save you much time as it does the computation swifter when planning your yearly tax payouts.
- The chances of making any human errors are much less when you use an online house rent allowance calculator.
- An online calculator of HRA will take into account all the variables and ask you to enter them so that it can accurately calculate the exempted and the taxable house rent allowance amount for your easy tax computations.
- It helps you plan your taxes better and encourages tax savings as you can compute the amounts in advance and prepare to file your tax returns.
Example for Calculating HRA
You live in a metropolis like Chennai and have rented a home for which you pay INR 30,000 each month as rent. Your income from your current employment is INR 1,00,000, and you receive a housing rent allowance of INR 40,000 as part of your salary.
The HRA calculation for tax exemption granted for HRA as per the three rules of the income tax act section 10(13A) is as follows:
The actual housing rent that you pay is equal to INR 30,000.
Actual rent paid less 10% of pay = 30,000 – (10% of 1,00,000) = 30,000 – 10,000 = INR 20,000
Because you live in a metropolis, Chennai, it is 50% of the pay = 50% of 1,00,000 = INR 50,000.
As a result, according to the HRA calculation formula and the income tax rule for the tax deduction, you can claim the lowest of the above three numbers, which is INR 20,000, and the remaining amount is taxable as per the IT laws.
Factors to Remember While Computing the HRA
There are several points that you should keep in mind while computing the HRA tax exemption amount, and they are as follows:
- If the rent you pay yearly exceeds the total amount of INR 1 lakh, you will have to furnish the PAN details of your owner along with the rental receipts you pay every month.
- For HRA calculation for income tax exemption, you will have to be an employee who receives a salary, and it should have the HRA component.
- If you are staying with your parents, you can take rental receipts from them by paying rent through an online transfer.
Using this online tool to calculate your house rent allowance tax exemption and the taxable amount from your yearly taxable income can save a lot of money. Ensure that you take advantage of the HRA calculator rules that the IT act provides, as it will make your tax computation less cumbersome. The tool is available to make your life comfortable, and you should utilize it by understanding how HRA gets calculated and its benefits. Before computing, the taxes, consider the factors and follow the easy steps of using this excellent online tool.