Understanding HRA Tax Exemption: How Much of Your HRA is Actually Tax-Free?

Dear All,

Can anyone help me in understanding the HRA calculation? How much percentage of HRA is exempt from tax calculation?

Regards,
Gayatri

Hi,

The actual HRA you will be entitled to will be the least of the following:
- The actual amount of HRA received.
- 40% of salary. This increases to 50% if you are renting out the house in Delhi, Mumbai, Chennai, or Kolkata.
- Rent paid minus 10% of salary (basic component + dearness allowance).

The HRA that does not get exempted is taxed.

For example:

Assumptions:
HRA per month = Rs 15,000
Basic monthly salary = Rs 30,000
Dearness Allowance = Nil
Monthly rent = Rs 12,000
Rental accommodation is in Mumbai.

Exemption:
- Actual amount of HRA = Rs 15,000
- 50% of salary = 50% x (30,000 + 0) = Rs 15,000
- Actual rent paid - 10% of salary = Rs 12,000 - [10% of (30,000 + 0)] = 12,000 - 3,000 = Rs 9,000

Rs 9,000, being the least of the three amounts, will be the exemption from HRA. The balance HRA of Rs 6,000 (15,000 - Rs 9,000) is taxable.

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Regards,
Gayatri

Dear All,

Please forward me the contact numbers of training institutes or consultants for practical knowledge of ESI/PF/TDS, etc.

Thank you.

Regards,
Pragati

My salary is 30,000 per month, and I am paying 4,000 rent per month. Our company doesn't provide HRA, TA, or DA; instead, it offers a straight salary of 30,000. How will my tax benefits be calculated for HRA?

Thanks

Regards

Hi Gayatri,

HRA is maximum up to 50% of Basic in metros and 40% in non-metros. An illustration: Your Basic - 10,000 In metros, HRA allowed - 5000. Tax exempted = Rs. 5000 (or actual rent paid, whichever is lower) minus 10% of your basic, i.e. Rs. 4000 per month is tax exempted (or actual rent paid minus 10% of basic if the rent is less than HRA permissible).

Similarly, HRA exemption applies for non-metros. Hope this clears your doubt.

Regards, R. Ponraj

Please take a look at the following blog post on calculating HRA exemption.

[Calculation of HRA exemption – Part I TIBS Blog](http://blog.tibs.in/2010/02/09/calculation-of-hra-exemption-part-i/)