How Does the HRA Exemption Calculator Work?
Under Section 10(13A) of the Indian Income Tax Act, salaried individuals living in rented accommodations can claim tax exemption on their House Rent Allowance (HRA). The exemption reduces your taxable income under the Old Tax Regime.
The exempt amount is strictly defined as the minimum of three statutory calculations stipulated by the Income Tax Department.
Formula & Mathematical Methodology
Exempt HRA is calculated as the lowest of:
- 1. Actual HRA received from your employer
- 2. Actual rent paid minus 10% of Basic Salary (+ DA)
- 3. 50% of Basic Salary (Metro cities: Mumbai, Delhi, Kolkata, Chennai) OR 40% of Basic Salary (Non-metro cities)
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Step-by-Step Practical Calculation Example
For an employee in Mumbai (Metro) with Basic Salary of ₹6,00,000/yr, HRA received of ₹2,40,000/yr, and actual rent paid of ₹3,00,000/yr:
- Cond 1 (Actual HRA): ₹2,40,000
- Cond 2 (Rent - 10% Basic): ₹3,00,000 - ₹60,000 = ₹2,40,000
- Cond 3 (50% of Basic): ₹3,00,000
- Total Tax-Exempt HRA: ₹2,40,000 (100% of received HRA is tax-free!)