HRA Tax Calculation: The Indian Finance Minister, Nirmala Sitharaman, has increased the standard deduction and tax exemption limit for salaried taxpayers filing their Income Tax Return (ITR) for the financial year 2023-2024. However, if an individual's income still falls under the taxable category, they can save tax by making multiple claims under the old tax system or claiming house rent allowance (HRA) under the same regime.
HRA is an allowance given by companies to employees in place of house rent expenses. It is included in the salary component provided by the company, and employees under regulation number 2A of the Income Tax Act are eligible for HRA exemption under section 10(13A) of the same Act. However, this exemption is not available under the new tax regime.
The amount of tax exemption on HRA can be calculated as follows:
• 50 per cent of basic pay + DA for those living in metro cities
• 40 per cent of basic pay + DA for those living in non-metro cities
• Actual rent paid, less than 10 per cent of Basic Pay + DA
HRA is beneficial for those who live in rented houses and not their own. To claim HRA, individuals must provide information to their employer.
While the new tax system has raised the tax exemption limit, salaried individuals can still save tax by making claims under the old system or by utilizing HRA, which provides exemptions on rent paid.
Read more: LIC Bima Ratna: Invest Rs 138 per day in this policy and get up to Rs 13.5 lakh
