HRA refers to House Rent Allowance. It is the amount paid by the employers to the employees as a part of their salary to meet their rented accommodation-related expenses. This provide some tax deductions for the employees. HRA allowance is only applicable for individuals who lives in the rented house. Use this online HRA Exemption Calculator to find how much portion of HRA you get from your employer is exempted from tax (house rent allowance exemption).
What would be the amount of exempted HRA and tax that is chargeable on an employee whose total salary (Basic+DA) is 25000, HRA is 3000 who pays a rent amount of Rs. 5000
HRA Exemption = Rent - Total Salary x (10/100)
= 5000 - 25000 x (10/100)
Chargeable tax = Exempted HRA - HRA
= 2500 - 3000