1. What Is HRA Exemption?

HRA (House Rent Allowance) exemption is a tax benefit available to salaried individuals who receive HRA as part of their salary and pay rent for their accommodation. The exemption is calculated as the minimum of three amounts.

2. How HRA Exemption Is Calculated

The exemption is calculated as the least of:

Where:

• \( \text{Received} \) — Actual HRA received from employer
• \( \text{Excess Rent} \) — Rent paid minus 10% of basic salary
• \( \text{Allowance \%} \) — 50% of basic salary for metro cities or 40% for non-metro cities

Explanation: The tax exemption is the smallest of these three values to prevent excessive tax benefits.

3. Importance Of HRA Exemption

Details: HRA exemption can significantly reduce taxable income for salaried individuals living in rented accommodations, leading to substantial tax savings.

4. Using The Calculator

Tips: Enter actual HRA received, rent paid, basic salary, and select your location. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What documents are needed to claim HRA exemption?
A: Rent receipts, rental agreement, and landlord PAN (if rent exceeds ₹1 lakh annually) are typically required.

Q2: Can I claim HRA if I live with my parents?
A: Yes, if you pay rent to your parents and have proper documentation. They must declare this rental income in their tax returns.

Q3: What if I don't receive HRA from my employer?
A: You may still claim deduction under Section 80GG, subject to certain conditions and limits.

Q4: How is metro vs non-metro determined?
A: The four metro cities are Delhi, Mumbai, Chennai, and Kolkata. All others are considered non-metro.

Q5: Can I claim full HRA if my rent is very high?
A: No, the exemption is always limited to the smallest of the three calculated values.