How to calculate HRA in salary?

House Rental Allowance is a portion of an employee’s salary which is given on a monthly basis by the employer. Many of the employees are confused about how to calculate HRA in salary. In this answer, I will help you understand how to calculate HRA from basic salary and how to claim HRA benefit.

HRA is calculated on the basis of your salary and the area where the employee resides. 

• If the employee resides in a metro city then the HRA will be equal to 50% of the salary

• If the employee resides in a non-metro city then the HRA will be equal to 40% of the salary.

HRA exemption for a salaried individual is the lowest of the following amounts:

• The actual HRA;

• 50% of basic salary + Dearness Allowance (DA)

• Actual rent paid - 10% of basic salary plus DA.

To claim HRA benefit you will have to produce the proof of payment of rent in the form of rent receipt, rent agreement or transaction record for rent. If the rent amount exceeds more than Rs. 1 lakh then you will have to attach PAN details of your landlord. These details are required to authenticate your claims.

I hope this answer was helpful to you.

HRA is the part of the salary received by an employee from an employer apart from basic salary. HRA stands for House Rent Allowance. House rent allowance means an employer is providing expenses to his/her employee to meet housing rent expenses. One of the common benefits of HRA is you can save tax amount by claiming HRA exemption. Mostly for an employer it is difficult to calculate HRA in salary. 

A salaried employee can’t claim HRA on the full rental amount he or she is paying. The exemption will be the least of the actual amount allotted as HRA by the employer, actual rent paid is less than 10% of the salary, or 50% of the basic salary if the employee is residing in a metro and 40% if the employee is residing in a non-metro city.