How much tax will I save on HRA?

The amount of tax you can save with HRA exemption depends on your income tax slab and the HRA amount received from your employer.

For example, if your basic salary is ₹50,000 per month (₹6 lakhs annually) and you are in the 30% tax slab, your tax on basic salary will be ₹1.8 lakhs (30% of ₹6 lakhs). Now, if you receive ₹1 lakh as HRA and pay ₹80,000 as rent annually, your taxable income is reduced by ₹80,000.

So, your revised taxable income is ₹5.2 lakhs (₹6 lakhs - ₹80,000 exemption claimed), and your tax at 30% slab will be ₹1.56 lakhs. Thus, you have saved ₹24,000 in taxes through HRA exemption.

The higher your HRA component and tax bracket, the more tax benefits you can avail.