HRA

What is HRA in Salary?

The HRA full form is House Rent Allowance. HRA, meaning in salary, is the allowance that an employee receives from the employer to cover the cost of living in a rented housing system. HRA is a part of your salary, but it is not completely taxable.

A little portion of the HRA is a part of the taxation under section 10 (13A) of the Income Tax Act of 1961. One important thing to consider is that, if you are living in your own home and do not pay rent, then the HRA you receive from the employer is completely taxable.

Who can claim HRA Tax Benefits?

If you want to claim the HRA tax benefits, then you have to meet the following requirements:

• They should be living in a rented house.
• They should receive HRA as a part of the CTC ( cost to company) while receiving the salary.
• They should provide the correct rent receipts and also proof of rent payments.

You should also keep in mind that the HRA exemption is calculated by keeping in mind all the different aspects, like salary, rent paid, city of residence, HRA received by the employee, etc.

NOTE: As per the rules and regulations of the Income Tax, the self-employed individuals are not allowed to claim HRA, but eventually they can claim other tax deductions based on the rented housing.

How to Calculate HRA Exemption?

An individual can claim the lowest of the following as the HRA exemption. The HRA calculation formula is given below:

• It can be the actual HRA received
• Actual rent paid - 10% of the basic salary + Dearness allowance
• 50% of [Basic salary + Dearness allowance] for those living in the metro cities like Delhi, Kolkata, Mumbai, and Chennai.
• 40% of [Basic salary + Dearness allowance] for those who are living in non-metro cities.

By following these methods, you can calculate the HRA exemption for yourself.