Calculate tax exemption on House Rent Allowance

Income and tax are like two sides of the same coin. You have to pay tax on the money you earn.

So how do you become rich?

You become rich by saving on your taxes. More you save on tax more is the money you spend on yourself and your family.

Your salary slip

Your Company gives you house rent allowance (HRA) as part of your salary. You get an amount of INR 200000 shown in the salary slip.

Do you have to pay tax on the entire amount you get as HRA?

Rule to calculate HRA exemption

You have to pay tax on the actual HRA received from the employer minus the amount which is the least among the above three conditions.

You stay in Bangalore with your wife in a rented apartment. You pay a monthly rent of INR 20000.This is INR 240000 a year.

You can calculate the tax exemption on the HRA you receive as follows :

You have to pay tax on the actual HRA received from the employer minus the amount which is the least among the above three conditions.

INR 2, 00,000 - INR 1, 68,000 = INR 32,000. You have to pay tax only on INR 32000 even though your HRA is INR 200000.You get a tax exemption on the remaining amount.

Calculate tax exemption on the HRA of your friend

Your friend works in Mumbai and has bought a house there. He resides in a rented apartment in Mumbai itself as his newly bought house is far away from his place of work. He gets HRA as part of his salary. Will he get a tax exemption on the HRA component of his salary?

Calculate tax exemption on the HRA of your cousin

Your cousin has bought a house in Bangalore which is under construction. He has availed a home loan to construct this house. He stays in a rented apartment. He gets HRA as a part of his salary. Will he get a tax exemption on the HRA component of his salary?

Calculate tax exemption on the HRA of your brother

Your brother has availed a home loan and purchased an apartment in your hometown of Bangalore. Can he avail a tax exemption on the HRA component of his salary?

This article should make you a master in calculating tax exemption on the HRA component of your salary.