House Rent Allowance (HRA) is an amount that employees receive from their employers as a part of their total monthly income. In case you stay in a rented apartment, your HRA will allow you to claim tax exemption on your annual rent. However, it’s not easy to calculate such tax benefits manually. This page will provide you with the details of an HRA exemption calculator.
Keep reading to know everything about this tool!
An HRA exemption calculator refers to an online financial tool that enables the computation of the amount of tax benefit per annum on your house rent allowance in accordance with the Income Tax Act, 1961. It gives you accurate results within seconds and simplifies the tedious calculation procedure.
Income Tax Rule 2A offers an easy way to calculate HRA exemption. As per this rule, the least amount from the following is eligible for tax exemption from a salaried individual’s income under Section 10(13A):
Let’s say Mr. Singh lives in Bangalore, where the monthly rent is Rs. 25,000. His monthly HRA is Rs. 10,000, while his basic salary amounts to Rs. 40,000 per month.
Now, let’s compute the different HRA provisions for this case:
Since the minimum amount will be applicable, it is clear that Mr. Singh will get an HRA exemption of Rs. 1,20,000 for the relevant fiscal year.
Isn’t this manual calculation time-consuming? To get the result faster, you can access a hassle-free HRA exemption calculator online.
Follow these steps to estimate your annual HRA benefits:
After following the steps mentioned above, you will know how much tax benefit you can avail of while filing your income tax returns. Keep in mind that on certain web pages, an HRA exemption calculator will be in the form of sliders (not fields). Nonetheless, the functionality stays the same.
Wondering why you should use this tool instead of calculating manually? Here’re the reasons why using an HRA exemption calculator is beneficial:
You must know the following eligibility requirements before availing HRA exemptions:
An HRA exemption calculator simplifies the procedure of determining HRA exemptions for a specific financial year; it takes into account your income, place of work, and more. So, don’t forget to access this tool before filing your tax returns.
Ans: You must submit your rent payment receipts for the previous year. In case you do not have your receipts, you can justify your rent payments using bank account statements. If you pay above Rs. 8334 (or above Rs. 1 lakh annually) as monthly rent, you need to provide your owner’s PAN details as well.
Ans: If the need arises, an individual can rent more than 1 property. However, only one of those properties will be eligible for HRA benefits. An increase in the number of rented apartments doesn’t mean you will be saving more tax.
Ans: An individual can opt for HRA benefits without rent receipts only when his/her apartment’s monthly rent is equal to or less than Rs. 3,000. It is mandatory to provide your rent receipts for higher rents.
Ans: Yes, you can claim HRA benefits while staying in your parent’s house. To be eligible for this exemption, you will have to pay a monthly rent to your parents. While filing your tax returns at the year-end, you need to furnish your rent receipts.
Ans: Yes, a homeowner can avail of HRA exemptions coupled with tax benefits on house loan principal and interest payments under these two cases:
You stay in a different city, i.e., your owned property is located elsewhere.
You have rented out your owned property but don’t get the said rent (your family member can receive this payment on your behalf).
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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