Tax Calculation for HRA: The standard deduction and tax exemption limit for salaried taxpayers submitting their Income Tax Return (ITR) for the fiscal years 2023 and 2024 have been raised by Indian Finance Minister Nirmala Sitharaman. However, if a person’s income is still taxable, they can claim house rent allowance (HRA) under the same regime or multiple claims under the old tax system to save tax.
HRA is a recompense given by organizations to representatives instead of house lease costs. Employees covered by regulation number 2A of the Income Tax Act are eligible for an HRA exemption under section 10(13A) of the same Act because it is a component of the company’s salary. However, the new tax system does not permit this exemption.
The following is how much HRA is exempt from taxation:
50% of basic pay plus DA for people who live in metropolitan areas;
40% of basic pay plus DA for people who live in non-metro areas;
Actual rent paid, less than 10% of Basic Pay plus DA
HRA is advantageous for people who live in rented homes rather than their own. Individuals must provide information to their employer in order to claim HRA.
Even though the new tax system has increased the maximum amount that can be exempt from paying taxes, salaried individuals can still save money on taxes by filing claims under the old system or by taking advantage of HRA, which allows for exemptions on rent paid.
