Understanding HRA Tax Exemption: How Is It Calculated and What Are the Benefits?

Dear All,

Can you please provide me with the details of HRA exemption from tax? I have searched online but am not satisfied with the results. Could you explain how the HRA percentage is calculated on the salary and how it can be exempted from tax in the actual calculation? It would be clearer if you could provide an example.

I am eagerly waiting for your reply as this is urgent.

Thank you.
Regards,
Amruta Rajput

HRA will vary from place to place. To get maximum tax exemption, one has to obtain a house rent receipt equivalent to HRA + 10% of gross salary. In other words, tax exemption towards house rent = rent - 10% of gross salary, subject to a ceiling of HRA.

For example:
Rent paid - 3000 -(A) HRA - 1000 - (B) Gross salary - 18000 -(C)
Tax exemption = (A) - (C) x 10% = 3000 - 1800 = 1200, subject to a ceiling of (B) i.e., 1000.
Hence, tax exemption is 1000.

Abbas.P.S