House rent allowance (HRA) is a significant part of your salary that employers offer to help with housing expenses. Many of us are unaware that we can save on taxes through HRA. The HRA amount is determined based on factors such as salary structure, the actual salary, and the city you live in. If you're a salaried individual renting a place, you can calculate your tax savings with our HRA calculator.

What is an HRA Calculator?

In many Indian cities, living costs have risen significantly in recent years, due to factors like inflation and increased disposable income. To assist employees with their living expenses, organizations provide House Rent Allowance (HRA). This HRA calculator helps you figure out the allowance amount you’re eligible for.

After the 7th Pay Commission’s recommendations, the HRA slabs in India were modified significantly. Cities are now divided into 3 slabs: Slab X includes major urban areas that typically require the use of an HRA exemption calculator, while Slab Y covers cities with relatively lower living costs.

How Can an HRA Calculator Assist You?

Using an online HRA calculator is beneficial for salaried individuals receiving HRA from their employer.

To claim an HRA exemption, you need to meet these 3 conditions:

• You must be a salaried employee receiving HRA as part of your salary. Self-employed individuals cannot use this calculator.
• You need to reside in a rented accommodation.
• The HRA must be more than 10% of your salary.

With our HRA calculator, you can assess how much tax you owe on your HRA. Some additional benefits of using the calculator include:

• You can claim HRA exemptions based on the calculated figures depending on the city you live in. Slab X cities tend to have higher living expenses compared to Slab Y and Z.
• The HRA exemption calculator helps you figure out your tax liability for the year.
• HRA slabs depend on the city of residence. For example, in high-cost cities like Delhi, Mumbai, and Chennai, the HRA exemption can be as high as 27%, while tier-2 and tier-3 cities have lower exemption percentages (18% and 9%, respectively).
• Using the calculator, you can plan your finances better, depending on the HRA amount allocated to you.

How is HRA Calculated in India?

IPOtank uses a standard formula to calculate the House Rent Allowance. In the calculation, salary includes the basic salary, Dearness Allowance, and other commissions.

Our product also serves as an efficient HRA tax benefit calculator. The exemption limit is calculated by considering the lowest value among the following three factors:

• The rent paid, minus 10% of the basic salary.
• The total HRA provided by the employer.
• 40% to 50% of the basic salary, depending on how expensive the living conditions are.

For example, consider Person A, who lives in Delhi and pays Rs 12,000 in rent. Based on the salary breakdown, here’s how HRA is calculated:

Total salary: Rs 44,500.

Now, using the HRA allowance calculator, we get the following figures:

• Rent paid minus 10% of basic salary: Rs 9,700
• HRA provided by the employer: Rs 15,000
• 50% of basic salary: Rs 11,500

The lowest of these values is Rs 9,700, so Person A’s HRA exemption is Rs 9,700, which will be deducted from taxable income.

How to Use the HRA Calculator?

Follow these steps to use the HRA calculator:

Step 1: Enter your basic salary and HRA from your salary slip.

Step 2: Enter the rent you pay and indicate whether you live in a metro city.

This will make the HRA calculation for tax purposes straightforward.

Advantages of Using the HRA Calculator

The key benefits of using a reliable HRA calculator in India include:

• The calculator is error-free and can be used repeatedly.
• It helps you claim the appropriate tax exemptions.
• The calculator considers all variables involved in the HRA calculation.