How to calculate HRA tax exemption?

by Shalini Laxmish Digital Marketing Executive

House rent allowance (HRA) is an essential part of your salary structure. Nonetheless, the greater part of us are not comfortable about the standards that can help us save tax on it. On the off chance that you are a salaried employee living on rent, at that point here's the means by which you can utilize HRA calculation to lessen your tax responsibility.

Calculation of tax-exempt HRA amount

The measure of HRA obtained by you from your employer isn't completely excluded from tax. The tax-absolved part of the HRA is actually the base of the accompanying:

a) Actual HRA got from employer

b) 50% of the 'compensation' if the convenience is in the metro urban communities (Delhi, Mumbai, Chennai, Kolkata) or, more than likely 40% for different urban communities

c) Excess rent paid yearly more than 10% of the yearly 'pay'

Here 'compensation' signifies fundamental compensation, dearness allowance (DA) (in the event that it frames some portion of the retirement advantage) and commission based on level of turnover. No different allowances like unique allowance are added into your compensation for registering the tax-absolved HRA sum.

Allow us to accept that you live in Delhi and pay a month to month rent of Rs 12,000. Your fundamental compensation is Rs 30,000 every month and you get a month to month HRA of Rs 15,000. The tax excluded HRA sum will be the most minimal of the accompanying:

HRA Calculation

The most minimal sum is referenced above is Rs 1.08 lakh which will be excluded from the tax. Rest of the sum will be taxable. Along these lines, Rs 72,000 (Rs 1.80 lakh - Rs 1.08 lakh) will be taxed by your pay section. The tax benefits also depend on the pay grade you are in and also other claims you make.

How to claim the benefit

To evade abundance TDS from being deducted from your compensation, you should give rent arrangement as well as rent receipts to your employer. In the event that your yearly rent installment is more than Rs 1 lakh, at that point you will give your landowner's PAN, also, to your employer.

Be that as it may, regardless of whether you have neglected to submit rent receipts/rent consent to your employer, at that point you can guarantee the advantage at the hour of documenting personal tax returns. It is prudent to keep evidence of rent paid and rent receipts as the tax division can request that you give it to verify your case.

Extraordinary cases to guarantee HRA advantage

Rent paid to your parents

On the off chance that you are remaining with your parents and paying rent to them, you will be qualified to guarantee the tax-exclusion on HRA. Specialists recommend that it is prudent to have narrative proof, for example, rent receipts, monetary transactions, rental consent to stay away from dismissal of cases by the tax office. There have been occurrences where the Income Tax office has dismissed cases on the grounds that there was no real verification of transactions having occurred.

Own a house however staying in a different city

Regardless of whether you own a house yet are remaining in a different city in view of your work, at that point, as well, you can guarantee HRA advantage in the event that you are living in a rented property.

When can you not file HRA exemption

In the event that you are accepting HRA yet are remaining in our own loft, at that point you can't guarantee the HRA exemption advantage. The entire HRA sum got will be taxable in your grasp