What is HRA?HRA is that part of an employee’s salary, paid by the employer, which offers a tax benefit to the employees for the amount paid by them towards the accommodation rent. In simple words, your employer pays a certain section of the salary as an allowance for the rent paid by you for a leased accommodation. This component of the salary can be used to avail tax rebate under the Income Tax Act, 1961.
The HRA is regulated under the guidelines provided under Section 10(13A) of the Income Tax Act of 1961. Salaried employees can claim HRA deduction as part of their Income Tax deductions. It can only be claimed by salaried employees staying in rented accommodation.
HRA CalculatorIn this age of digitization, many calculations vis-à-vis salary, investments, tax, and rebates can be done online through multiple online calculators. HRA calculators online help in determining the HRA deduction in a financial year.
Conditions for HRA Deduction CalculationThe HRA calculation is based on multiple factors like –
- City –
- If the employee resides in a metro city, then they are entitled to an HRA of 50% of their basic salary.
- If the employee is residing in a non-metro city, then they are entitled to an HRA of 40% of their basic salary.
- Lowest Among the Following – The minimum value among the following is considered for HRA deduction for Income Tax benefit Let us take the example of Ms. Rukmini for calculating the amount of HRA applicable for a Tax deduction. Rukmini stays in a rented accommodation in Pune with a monthly rent of Rs. 15000. Following is the monthly salary of Rukmini –
Now to calculate the HRA of Rukmini that is exempt from her Income Tax, we have to consider all the three scenarios discussed above –
The lowest value among these is Rs. 1,38,000; this amount will be considered for Rukmini’s HRA deduction calculation for Income Tax benefits.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
How to save on gift tax in India?
You need to pay taxes on gifts which exceed the limits set by the Government. However, gifts of any amount received or given from relatives including parents and spouse are tax-free.
6 Factors for Rising Health Insurance Premiums
While the demand for health insurance policies has certainly increased, there has also been a rise in the premium costs. Read this post to know the top factors that lead to an increase in the premiums of health insurance.
What Is FTSE And Why Does It Matter?
Informally referred to as the ‘footsie’, FTSE is a joint venture between the London Stock Exchange and the Financial Times of London. The acronym stands for Financial Times and Stock Exchange, and the indices of this joint venture comprise UK’s most highly-capitalized companies that are listed on the London Stock Exchange.
5 Types of Business Loan For Woman Entrepreneurs
There are now many different types of loans options in India for women wanting to explore their entrepreneurial dreams. Read this post to know 5 of the most popular options.