How Much Tax Can Be Saved On House Rent?

Wondering how much tax can be saved on HRA? Here’s a detailed explanation of the same.

How Much Tax Can I Save on House Rent?

If you are a salaried individual receiving House Rent Allowance (HRA) as part of your salary, you can claim tax exemption on HRA under Section 10(13A) of the Income Tax Act. The amount of HRA exemption is calculated as the least of the following three amounts:

1. Actual HRA received from the employer.

2. 50% of salary (basic salary + dearness allowance) for those living in metro cities (Mumbai, Delhi, Kolkata, Chennai), and 40% of salary for those living in non-metro cities.

3. Actual rent paid minus 10% of salary (basic salary + dearness allowance).

Suppose your annual salary (basic + DA) is Rs. 600,000, you receive an annual HRA of Rs. 180,000, and you pay an annual rent of Rs. 150,000 while living in a non-metro city. The HRA exemption will be calculated as follows:

1. Actual HRA received = Rs. 180,000

2. 40% of salary = 40% of Rs. 600,000 = Rs. 240,000

3. Rent paid - 10% of salary = Rs. 150,000 - Rs. 60,000 = Rs. 90,000

The least of the above three amounts is Rs. 90,000. Therefore, Rs. 90,000 of the HRA received will be exempt from tax.

If you do not receive HRA, and wondering how much tax can be saved on house rent, I’d like to say that you can still claim a deduction for rent paid under Section 80GG of the Income Tax Act. To claim this deduction, the following conditions must be met:

• You should be self-employed or a salaried individual.

• You, your spouse, or your minor child should not own residential accommodation at the place where you currently reside.

• You should not have claimed an HRA exemption.

The deduction under Section 80GG is the least of the following:

1. Rs. 5,000 per month.

2. 25% of total income (excluding capital gains).

3. Actual rent paid minus 10% of total income.

Suppose your total annual income is Rs. 600,000, and you pay an annual rent of Rs. 120,000. The deduction will be the least of the following:

1. Rs. 5,000 per month = Rs. 60,000 annually.

2. 25% of total income = 25% of Rs. 600,000 = Rs. 150,000.

3. Rent paid - 10% of total income = Rs. 120,000 - Rs. 60,000 = Rs. 60,000.

The least of the above amounts is Rs. 60,000. Therefore, you can claim a deduction of Rs. 60,000 under Section 80GG. 

This is

how much tax can be saved on HRA.

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Save yourself from paying taxes on HRA or House Rent Allowance. Thanks to my cousin who helped me to understand how the tax can be saved on HRA. I did not know that I could avoid paying taxes on it but after learning it from several of my colleagues, I asked my cousin

how much tax can be saved on house rent and he just said a lot. First, know that an individual is not liable to pay tax on rental income if Gross Annual Value of a property is below Rs. 2.5 lakh. Let me share more related details.

Which section states the tax saving on house rent?

Self employed persons can also claim for HRA tax exemptions towards the HRA allowance. They can claim the benefits under the section 80 GG.

The salaried person can also claim the HRA tax exemptions if he does not receive any HRA. 

How much tax can I save on house rent being a salaried person?

The Income Tax Act Section 10-13A provides for HRA exemption of tax and the deduction gets reduced amongst

• The HRA allowance that is given by the employer

• 50% of the employee salary is eligible for HRA tax exemption if the person lives in any Metro cities of India. 

• If the employee lives in any other city then 40% of the salary can be HRA exempted

• The actual rent that the employee pays for the house each month minus 10% of his or her salary

Now to answer your query how to save tax on house rent allowance precisely, let me share with you an example.

• Suppose you pay Rs 10,000 as rent and your

• Salary is Rs 30,000

• HRA is 13,000

• Conveyance is Rs 2000

• Special allowance is Rs 1250

• Medical is Rs 1250

• Leave Travel Allowance is Rs 5000

• Total is Rs 54,250.

Rs 200 will get deducted as professional tax and PF of Rs 2000. 

The money you can claim from the salary is

1. Actual rent paid yearly minus 10% of basic salary = Rs {(10000*12) - 36,000} = Rs 84,000

2. Actual HRA given by the employer annually = Rs (13,000*12) = Rs 156000

3. 50% of basic salary = Rs 1,80,000

So you can claim Rs 84,000 for tax exemption as it is the least of the following amounts mentioned above.

I hope this answers your query on how to save tax on house rent.  

I know many of you were unaware of this tax exemption. Recently a fresher too posed the question how to save income tax on house rent and this is exactly what I said to him. Save your money as much as possible. 

This is all I know on how much tax can be saved on house rent.