HRA Tax Calculator: How much tax relaxation you get on HRA on Rs 4 lakh basic salary

House Rent Allowance (HRA) is part of our monthly salary. It is printed on our salary slips. HRA is a key component to save income tax. Salaried and self-employed get HRA tax relaxation under Section 10(13) of the Income Tax Act. Employees in the same salary bracket may get different HRAs from their respective companies depending on the Tier-type of their employment place. Everyone who receives HRA from their company needs to know two things. There are three conditions to determine tax relaxation on your HRA, and you may not get tax relaxation on the entire HRA you receive from your company. Also know how how much HRA tax relaxation you will get if your basic salary is Rs 4 lakh a year.

HRA tax relaxation determining factors

When you are claiming tax relaxation on your HRA, you have to extract three types of data. Whichever figure is the lowest, you get tax exemption on that.

1- The HRA given by the company in the salary can be claimed.

2- HRA can be claimed up to 50 per cent of the basic salary in metro cities and 40 per cent of the basic salary in non-metro cities.

3- You can claim HRA of the amount that is left after deducting 10 per cent of the basic salary from your total rent.

Understand it with example

Suppose, your annual basic salary is Rs 4 lakh, you live in a metro city, and your monthly house rent is Rs 20,000 a month, and in your salary structure, you are getting HRA of Rs 2.20 lakh from the company.

Based on the above-mentioned three conditions, and this is how much income tax benefit from HRA you can get

1- The HRA received from the company i.e. Rs 2.20 lakh.

2- 50 per cent of basic salary in metro city i.e. 50 per cent of Rs 4 lakh, which is Rs 2.00 lakh.

3- Rent of Rs 20,000 every month means that you spend Rs 2.40 lakh on house rent in a year. In the third situation, if you calculate, then after deducting 10 per cent of your basic salary from this rent, the amount that will be left, you can claim it as HRA. That means 2.40 lakh – 40 thousand (10 per cent of basic salary) = Rs 2 lakh.

In this way, even though you are getting house rent allowance of Rs 2.20 lakh from the company, you can claim only up to Rs 2 lakh under HRA.

So, when you do tax planning, calculate the amount of HRA at that time and not according to the salary structure HRA, because even by exceeding Rs 1, many times people come under the tax net.