How to Calculate House Rent Allowance?

HRA Online Calculator 2023 after 7th CPC

HRA is a typical component of an Indian salary package that assists employees in covering their rent expenses. It is tax-free up to a certain threshold and is therefore an attractive aspect of the salary structure. The employee’s salary, city of residence, and precise rental rate all determine the HRA’s sum.

In India, the HRA amount is based on a percentage of the employee’s basic pay, which varies by city, with higher percentages applied to those in metropolitan areas. The actual HRA sum is determined by the actual rental fee paid, which cannot exceed the HRA percentage of the basic salary. To be eligible for HRA, an employee must live in a rented residential property and provide rental evidence to their employer.

What is the meaning of HRA?

Employers provide HRA to their employees as a part of their salary to assist with expenses related to rental housing. Living in a rented house is a requirement for qualifying for HRA exemption. The exemption for HRA falls within the scope of Section 10(13A) and Rule 2A of the Income Tax Act, 1961.

What is House Rent Allowance in Salary?

The HRA is an employee benefit that facilitates the coverage of an employee’s living expenses in the city where they work. Although it is considered part of an employee’s salary, a portion of the HRA can be exempted from taxes under Section 10 (13A) of the IT Act of 1961 given certain conditions are met. Employers determine the amount of HRA provided to their employees based on their salary structure, compensation level, and city of residence. It is advisable to communicate with your employer to ensure that you receive the maximum possible tax benefits permitted under the Income Tax Act.

What is the current rates of HRA?

The HRA rates may change based on the percentage of Dearness Allowance (DA). Under the current proposal of the 6th Central Pay Commission, individuals residing in Class X cities are eligible for 30% of basic pay + grade pay + military service pay + NPA, while those in Class Y and Z cities are eligible for 20% and 10% respectively. However, when the DA exceeds 25%, the HRA rates will be adjusted to 27%, 18%, and 9% for X, Y, and Z class cities respectively. Subsequent adjustments will be made when the DA exceeds 50%, bringing the rates back to 30%, 20%, and 10%.

What are the benefits of HRA for Govt Employees?

The House Rent Allowance (HRA) is an integral component of the compensation package for Central Government workers, covering costs associated with rental housing. HRA rates are categorized by city classification into three groups which are X, Y, and Z. Effective from July 1st, 2021, HRA rates have been updated to 9% (Z Class), 18% (Y Class), and 27% (X Class) for corresponding cities. Employers distribute a part of an employee’s basic salary towards this allowance, determined by the employee’s location. Calculating HRA within the salary is a straightforward process. If an employee’s basic salary is Rs. 49000, the HRA would be Rs. 13230 (27%), Rs. 8820 (18%), and Rs. 4410 (9%), depending on the city of residence.

When will increase HRA to 30 percent?

On July 1, 2021, the House Rent Allowance (HRA) for Central Government employees underwent a revision. Another revision will occur in 2024 when the dearness allowance (DA) percentage reaches 50%. The HRA will be raised from 27% to 30%, given that the DA increase reaches 50%. As per a memorandum from the Department of Personnel and Training, the HRA will become 30%, 20%, and 10% respectively when the DA crosses 50%. When the DA surpasses 25%, the HRA will also be raised to 27%, 18%, and 9% of Basic Pay in X, Y, and Z cities, and again to 30%, 20%, and 10% of Basic Pay in the same cities when the DA reaches 50%.

What is the minimum rate of HRA?

Over 700,000 employees are set to receive a boost with the new minimum HRA rates. In X-class cities, the rates have been increased to at least Rs. 5400, in Y-class cities it will be a minimum of Rs. 3600, and in Z-class cities, it will be at least Rs. 1800. It’s noteworthy that the minimum HRA amount has been fixed at Rs. 1,800, which is equivalent to 10% of the minimum basic pay.

Classification of Cities for HRA after 7th CPC

The 7th Pay Commission determines the classification of cities for HRA based on population records, dividing Indian cities into X, Y, and Z categories. For HRA purposes, X and Y class cities are eligible for 24% and 16% HRA, respectively, while Z class cities receive different rates. The table below provides the State-wise list of X, Y, and Z class cities.

In Andhra Pradesh and Telangana, Hyderabad is classified as an X city with 24% HRA. Vijayawada, Warangal, Greater Visakahapatnam, Guntur, and Nellore are all Y cities with 16% HRA. Guwahati is the only Y city in Assam, while Patna is the only Y city in Bihar.

Chandigarh and S.A.S. Nagar, Mohali are the only two cities in Chandigarh, both of which are Y cities with 16% HRA. Durg-Bhilai Nagar and Raipur are the two Y cities in Chhattisgarh.

Delhi is the only X city in Delhi, with a 24% HRA. Ahmedabad is the only X city in Gujarat, while Rajkot, Jamnagar, Bhavnagar, Vadodara, and Surat are Y cities with a 16% HRA. Faridabad and Gurgaon are Y cities with a 16% HRA in Haryana.

Srinagar and Jammu are both Y cities with 16% HRA in Jammu & Kashmir, while Jamshedpur, Dhanbad, Ranchi, and Bokaro Steel City are all Y cities in Jharkhand.

Karnataka’s Bangalore/Bengaluru is an X city with 24% HRA. Belgaum, Hubli-Dharwad, Mangalore, Mysore, and Gulbarga are all Y cities with 16% HRA. Kerala has Kozhikode, Kochi, Thiruvananthapuram, Thrissur, Malappuram, Kannur, and Kollam as Y cities.

Madhya Pradesh has Gwalior, Indore, Bhopal, Jabalpur, and Ujjain as Y cities. Maharashtra’s Greater Mumbai and Pune are the only X cities, with other cities like Amravati, Nagpur, Aurangabad, and Nashik being Y cities with 16% HRA.

Cuttack, Bhubaneswar, and Raurkela are Y cities in Odisha. Puducherry/Pondicherry is a Y city in Puducherry, and Amritsar, Jalandhar, and Ludhiana are Y cities in Punjab.

Rajasthan has Bikaner, Jaipur, Jodhpur, Kota, and Ajmer as Y cities. Tamil Nadu’s Chennai is the only X city, while Salem, Tiruppur, Coimbatore, Tiruchirappalli, Madurai, and Erode are Y cities with 16% HRA.

Uttar Pradesh has several Y cities, including Moradabad, Meerut, Ghaziabad, Aligarh, Agra, Bareilly, Lucknow, Kanpur, Allahabad, Gorakhpur, Varanasi, Saharanpur, Noida, Firozabad, and Jhansi. Uttarakhand’s Dehradun is the only Y city, and West Bengal’s Kolkata is the only X city, with Asansol, Siliguri, and Durgapur being Y cities with 16% HRA. Note that Saharanpur was classified as a Y class city in June 2011.

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HRA Exemption from Income Tax

Discover how to calculate the exemption from Income Tax on your HRA (House Rent Allowance) as a salaried employee. Rules 10(13A) and Rule 2A of Income Tax allow you to claim exemption on the smallest of the following amounts: actual HRA received in your salary, 40% of your salary (Basic Pay + DA) for Non-Metros, 50% of your salary (Basic Pay + DA) for Metros like Mumbai, Calcutta, Delhi, or Chennai, or rent paid minus 10% of your salary. However, if you’re living in your own house or not paying any rent, you won’t qualify for the exemption on HRA. Don’t worry, we have an HRA Exemption Calculator to assist you in determining the exact amount of exemption you can receive. Use our calculator today and benefit from tax-free income with HRA exemption.

7th Pay Commission New HRA Table

HRA Rates for Pay Matrix Level 1

HRA Rates for Pay Matrix Level 2

HRA Rates for Pay Matrix Level 3