Learn how HRA exemption is calculated and how salaried employees can save tax on rent.
House Rent Allowance (HRA) is a component of salary provided to employees who live in rented accommodation. A portion of HRA received can be claimed as tax exemption under the Income Tax Act.
HRA exemption is calculated as the minimum of the following three:
- Actual HRA received
- Rent paid minus 10% of basic salary
- 40% of basic salary (50% for metro cities)
Proper documentation such as rent receipts and PAN of the landlord (for high rent) is required to claim HRA exemption.
Using an HRA calculator helps salaried individuals estimate tax savings accurately.
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