325
5 min read
HRA, or House Rent Allowance, is a part/component of salary in India for most salaried employees. It helps people save taxes, especially those living in rented accommodations. If you are unaware of the key features of the HRA tax calculations and deduction or how you can benefit from them, you must read the post to know them all.
Table of Contents Show
HRA is the short form of House Rent Allowance. In India, HRA forms a primary component of your salary slip that helps you save on taxes. HRA is the sum that an employer pays to an employee to help them pay for the incurred cost of a rented house to support the rising cost of living. Further, HRA helps an employee save on overall taxes.
Section 10(13A) of the Income Tax Act allows an individual to claim a part of HRA as a tax deduction. However, this requires the employee to meet the below criteria of eligibility:
The entire amount of HRA as per your salary may not be eligible for tax exemption completely. An individual can claim HRA tax benefits as the minimum of the below three amounts:
Here, you may note that salary includes basic salary, dearness allowance (DA), and any other commissions as applicable for HRA calculation.
Let’s take an example to understand the HRA calculations for Income Tax better. Sahil lives in Kolkata and is a salaried employee in an organization. He lives in a rented accommodation and pays INR 10,000 as monthly rent for his house. The HRA he receives every month is INR 12,000, and his basic salary is INR 25,000. Now, let us see the tax deductions that Sahil can claim as per this allowance and the above criteria for claiming HRA in the table below:
Salary component |
Amount (INR) |
Basic salary |
25,000 |
HRA |
12,000 |
Conveyance |
3000 |
Medical Allowance |
2500 |
Special Allowance |
2050 |
Total |
44, 550 |
Now, we already know that the HRA tax deduction as per the HRA calculation formula that can be claimed should be the least of the below amounts:
As per the above calculations, the calculation made in the first category is the least amount to be deducted. That is the actual rent paid minus 10% of the basic salary. Hence, Sahil will receive an HRA exemption of INR 7,500 on his taxable income.
Here are a few important things to remember if you want to claim HRA deductions:
Many people are not eligible for HRA tax exemptions per their salary component. So, how can they save tax on house rent? Also, what about self-employed individuals? Can they save on tax if they don’t receive any salary? The answer is yes! One can still claim tax exemptions on house rent without HRA as per section 80GG of the IT Act.
In the case of section 80GG, the maximum deduction amount that an individual can claim should correspond to the minimum of the below amounts:
Conclusion
HRA is a significant deduction for taxpayers that can save on the total tax they pay. However, if you get HRA as a salary component but don’t live in a rented house, you cannot avail of the deduction. It will be fully taxable. You may use an HRA tax exemption calculator to evaluate the tax deduction you are eligible for as per your HRA allowance.
Browse Mahindra PayBima Blogs to read interesting posts related to Health Insurance, Car Insurance, Bike Insurance, Term Life Insurance, and Investment section. You can visit Mahindra PayBima to Buy Insurance Online.
Yes, if you have the provision of HRA in your salary and you live with your parents, you can seek an exemption by showing rent receipts in your parents’ name.
You may note that you can claim HRA directly on the IT returns. Thus, if you forget to submit receipts of your house rent to your employer as proof, you may claim HRA at the time of filing your IT returns.
Yes, HRA and home loan deductions can be claimed. If a homeowner is paying back the loan on the home and is living in a rented property, they can claim both HRA and home loan deductions.
Yes, HRA can be claimed by a house owner even if they own a house. However, as mentioned in the post above, you must meet the eligibility criteria for the same. If you own a home in one city and are working and earning a living in another city, you can claim an HRA tax deduction.
Yes, a separate HRA rate is followed for taxpayers working for the armed forces as per the recommendations of the seventh CPC.
Rent receipts paid during a year or lease agreement and bank statements can be used to show as proof of rent paid.
To claim an HRA exemption, you may submit rent receipts as proof to your employer. You may also claim an HRA exemption at the time of filing your ITR.
HRA full form is a house rent allowance.
PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
The Social Security Pension Management Information System (SSPMIS) Mukhyamantri Vridhjan Pension Yojana is the Bihar Government’s social security scheme. This scheme was initiated to offer.
Filing the ITR within the due date is very important. By doing so, taxpayers can evade penalties and other consequences due to not filing or.
In India, many opt for life insurance as a smart move to protect themselves and their families, given the unpredictable future. It's a practical step,.
Taxpayers can claim tax deductions under section 80DDB of the Income Tax Act, 1961, on the treatment expenses of certain specified diseases. This deduction can.
In most cases, House Rent Allowance (HRA) is a part of employees' salary and they can claim an exemption for HRA. Hence, if an employee.
Taxes are important for the financial well-being and the good governance of a country. Without taxes, the functioning of the country gets disturbed. The tax.
When joining a new organization in the middle of a fiscal year, employees need to fill out Form 12B. This form informs the new employer.
Payment of Income Tax is directly related to the economy of a country. Hence, every taxpayer in India is expected to pay income tax responsibly.
You may already know that a rental income or the money earned from renting a property is subject to TDS or tax deducted at the.
We know that almost every individual owns a savings bank account. We also know that the interest earned on your savings accumulated in a savings.
Speak to our advisor
Mahindra Insurance Brokers Limited (A Mahindra Group Company) - Unit-202, A-Wing, 2nd Floor, Amiti Building, Agastya Corporate Park, Kamani Junction, LBS Marg, Kurla West, Mumbai - 400070. Tel: +91 22 66423800
Licenced by IRDAI License No. 261; License Validity : 17-05-2025; Category : Composite Broker; CIN : U65990MH1987PLCO42609 Member of Insurance Brokers Association of India (IBAI).
Insurance is the subject matter of solicitation.
For a seamless experience, use the latest version of Chrome/Firefox/Internet Explorer.
Copyright © 2024 Mahindra Insurance Brokers. All Right Reserved.
Verify your number to activate your best premium offer
Please enter the OTP sent to XXXXXX 4099 to continue