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How Does an HRA Calculator Work?
Vance’s HRA calculator takes your salary, HRA, rent paid, and city type and fits them together to show you how much your HRA is, and you can thereby optimize your tax savings.
The exemption for HRA is determined under Rule 2A of the Income Tax Rules, which specifies that the least of the following amounts is exempt from taxation under Section 10(13A) and is, therefore, not included in taxable income. Here is how the HRA calculation takes place:
- The actual HRA received from the employer
- For residents of metro cities: 50% of (Basic salary + Dearness allowance)
- For residents of non-metro cities: 40% of (Basic salary + Dearness allowance)
- The actual rent paid minus 10% of (Basic salary + Dearness allowance)
