How to Save Income Tax on HRA?
If you receive house rent allowance (HRA) as part of your salary, you may be able to claim tax deductions on it to reduce your tax liability. Here are some tips on how to save income tax on HRA: Calculate your HRA exemption The first step in saving tax on HRA is to calculate the amount of exemption you are eligible for. The exemption is calculated as the least of the following: The actual HRA received Rent paid minus 10% of basic salary 50% of basic salary (for those living in a metropolitan city) or 40% of basic salary (for those living in a non-metropolitan city) For example, if you receive a basic salary of Rs. 50,000 per month and pay a rent of Rs. 20,000 per month, your HRA exemption would be calculated as follows: HRA exemption = min (Rs. 20,000, Rs. 20,000 - (10% x Rs. 50,000), 50% x Rs. 50,000) = min (Rs. 20,000, Rs. 15,000, Rs. 25,000) = Rs. 15,000 In this case, you would be able to claim a tax deduction of Rs. 15,000 on your HRA. Keep proof of rent paid to save income t...