Formula to Calculate HRA Exemption
KreditBee employs a straightforward HRA calculation formula to calculate the total payable amount. When calculating HRA, 'salary' includes the Basic Salary, Dearness Allowance (DA), and any other variable commissions.
Our tool also serves as an effective HRA tax benefit calculator. The actual exemption amount is determined by the lowest of the following three criteria:
- The total (actual) rent paid minus 10% of the basic salary.
- The total (gross) HRA provided by the employer.
- Depending on the cost of living in the area, 40% to 50% of the basic salary.
Let's take an example of an individual, Komal, who resides in Mumbai and pays Rs 15,000 per month for rent. Here’s a breakdown of Komal’s salary structure based on our HRA calculator:
| Salary Component |
Total Amount (each month) |
| Basic Salary |
₹30,000 |
| HRA |
₹18,000 |
| Conveyance Allowance |
₹4,000 |
| Medical Allowance |
₹1,500 |
| Special Allowance Under Other Heads |
₹3,000 |
This adds up to a monthly salary of Rs 56,500 for Komal.
Using the three criteria mentioned above, our HRA calculator determines the following:
- Actual rent paid minus 10% of the basic salary: ₹12,000
- HRA provided by the employer: ₹18,000
- 50% of the basic salary: ₹15,000
Since the lowest of these three amounts is Rs 12,000, this is the HRA amount that will be exempt from Komal's taxable income.