## Introduction

The House Rent Allowance (HRA) is a significant component of the salary package for many individuals. If you are a salaried individual and receive an HRA, you can claim a deduction for the HRA component of your salary under Section 10(13A) of the Income Tax Act. In this article, we will discuss how to calculate HRA deduction for income tax purposes.

To calculate the HRA deduction, you need to know the following information:

Actual rent paid: This is the amount of rent you pay for your accommodation. It is important to note that you can claim HRA deduction only if you are paying rent for a house or an apartment.

Basic salary: This is the basic salary you receive from your employer. The HRA component of your salary is generally a percentage of your basic salary.

City of residence: The HRA deduction calculation depends on the city in which you reside. The HRA deduction is higher for individuals living in metropolitan cities compared to those living in non-metropolitan cities.

Once you have the above information, you can calculate the HRA deduction using the following formula:

HRA deduction = (Actual rent paid – 10% of basic salary + HRA received) x HRA factor

Here, the HRA factor is the lower of the following three amounts:

50% of basic salary if you are living in a metropolitan city (or 40% of basic salary if you are living in a non-metropolitan city)
Real rent paid less ten percent of base pay
Let us take an example to understand the calculation of HRA deduction:

Mr. X is a salaried individual living in Mumbai. His basic salary is Rs. 50,000 per month, and he pays a monthly rent of Rs. 20,000.His employer gives him a Rs. 20,000 HRA. To calculate his HRA deduction, we need to first calculate the HRA factor.

HRA factor = lower of (actual HRA received, 50% of basic salary, actual rent paid – 10% of basic salary)

= lower of (Rs. 15,000, Rs. 25,000, Rs. 15,000 – Rs. 5,000)

= Rs. 10,000

Now, we can calculate the HRA deduction as follows:

HRA deduction = (Actual rent paid – 10% of basic salary + HRA received) x HRA factor

= (Rs. 20,000 – Rs. 5,000 + Rs. 15,000) x Rs. 10,000

= Rs. 3,00,000

Therefore, Mr. X can claim an HRA deduction of Rs. 3,00,000 for income tax purposes.

In conclusion :

If you are a salaried individual and receive an HRA, you can claim a deduction for the HRA component of your salary under Section 10(13A) of the Income Tax Act. To calculate the HRA deduction