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House Rent Allowance Calculation – AY 2014-15

Calculation of House Rent Allowance (HRA) for AY 2014-15

Calculation of House Rent Allowance for Assessment Year 2014 is calculated based on the following 4 conditions.

1) Location 2) Salary (Basic Salary and DA) 3) House Rent Allowance (HRA) received from the organization and 4) Rent Actually paid during the year.

Actual exemption of House Rent Allowance will be the minimum of 2,3 and 4 above.  Location will determine the percentage of exemption applicable on Salary.  Note:  For the purpose of calculating HRA,  only Basic Salary and DA on Basic salary will be treated as Salary and other perks and perquisites are ignored.

NEW UPDATE ON 11 JUL 2014

Online Income Tax calculator for Assessment Year 2015-16 (Financial Year 2014-15) including HRA calculation

Calculate  HRA Exemption for AY 2014-15

House Rent Allowance Calculation Formula

1)  Location of Residence:  Location for the purpose of calculation of House Rent Allowance is classified as Metro and Non-Metro. For Tax Assesses residing in Metro cities like Delhi, Mumbai the exemption is 50% of the Salary and for Non-Metro cities it is limited to 40% of Salary (Basic Salary  + Dearness Allowance on Basic Salary).

2)  Salary:  As mentioned above it is the amount received as Basic and DA during the Financial Year ( 2013-14)

3)  HRA Received :  It is the actual amount received from the company during the year as House Rent Allowance.

4)  Rent Paid :  Actual Rent paid during the financial year.

For House Rent Allowance Calculation online you can use this online income-tax calculator for AY 2014-15.  With this online calculator you can easily calculate total tax liability

Below image shows the calculation of HRA for Metro cities (Snapshot taken from the online income tax calculator mentioned above).

house rent allowance calculator for metro cities

Similarly, the following table shows calculation of House Rent Allowance Calculation with Exemption for assesses in Non-Metro Cities.

house rent allowance calculation for non metro cities - online calculator for hra

You can notice that with same Salary, Actual Rent Paid and HRA Received, there is difference in the exemption of HRA based on the criteria of Metro and Non Metro. Simply select Metro or Non-Metro from drop down box in the calculator and HRA Exemption Calculation will be done instantly.

Example of HRA Calculation of AY 2014-15 (FY 2013-14): Let us take the above example for explanation of how HRA exemption is calculated.

Total Salary (Basic+DA) received during the year is 4,50,000. HRA received from the company during the year is 1,44,000 and Actual Rent Paid is also 1,44,000.

HRA Exemption Calculation formula:

The minimum of the three will be actual exemption of HRA.

1)  40% of Salary that is 1,80,000 for Non Metro or 50% of Salary i.e 2,25,000 for Metro Cities.

2)  Actual HRA Received which is 1,44,000 and

3)  Rent paid in excess of 10% of salary.

As salary is 4,50,000, 10% of salary will be 45,000.  Rent Paid in excess of 45,000 is 99,000 (1,44,000 – 45,000).

As can be see 99,000 is the maximum HRA that can be claimed as exemption.  It is more than HRA Received from the company and Actual Rent Paid.

If Rent Paid is 1,99,000 then Exemption for House Rent Allowance Calculation will be 1,44,000 which is equivalent to Actual HRA received from the company.(1,99,000 – 45,000). To claim the Actual HRA Received from company, in this case, one need to show a minimum of 1,99,000 as Rent which works out to be 16583.33.

From this Assessment Year, it will be difficult to show inflated house rents which are actually not paid.  It is due to the fact that if House Rent paid is more than 1 Lakh per year, then PAN (Permanent Account Number) of House owner must be submitted along with Rent receipt.  As the excess amount shown will not match with returns submitted by owner, it may cause for observations.   It is advisable to show correct amounts to avoid any hassles.

To understand and easily calculate total tax liability with inbuilt House Rent Allowance Exemption Calculation check my Income Tax Calculator with HRA Exemption.

Please refer Income Tax India Website for detailed rules of House Rent Allowance Calculation. Please get advise from your tax consultant for accurate advice regarding taxes and exemptions available.