HRA is exempt to certain extent under income tax law. Both for employee and employer , the computation of exemption out of HRA is an annual ritual. However , computation of exemption out of HRA is a bit tedious . For example , the computation is based on population of city in which employee has taken house on rent. For that you will have to follow Rule 2A of Income Tax Rule .How nice it would have been if there was a calculator for computing exempt amount out of HRA !
Your wish is fulfilled! Here is a nifty calculator for computing exemption out of HRA received by an employee which is exempt as per the calculation prescribed under Income Tax Rule 2A which fixes exemption to the least of following
- Excess of rent paid over 10% of salary due for the relevant period or
- if the house is in Mumbai,Kolkata,Delhi or Chennai- 50% of salary and to any other place –40% of salary due for the relevant period
- actual allowance received for the relevant period
Salary for the purpose of computation is
- basic salary,
- dearness allowance if provided in terms of employment and
- Commission as a % of turnover achieved by the employee on due basis for relevant period
For the benefit of readers and tax payer , a HRA exemption calculator (Beta stage )has been built as under. Readers are requested to report any error if found
Please note that HRA exemption is not available when an assessee lives in his own house or in a house for which he does not pay rent. So rent payment evidence is very important for claiming HRA exemption.
Report any bug you find in House rent Allowance (HRA) exemption calculator