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Maximum hra that can be paid

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Querist : Anonymous

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Querist : Anonymous (Querist)
02 February 2013 I want to know how much amount company can pay to employee as HRA.
i.e. If Total Salary of employee is 5,00,000 Rs....Can company show that Rs. 1,00,000 is HRA given and Rs. 4,00,000 is Basic Salary....So that employee can claim HRA Exemption in income tax act and can enjoy reduced tax liabelity...
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CA PARAS BAFNA

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CA PARAS BAFNA (Expert)
02 February 2013 I support your view.
The important factor may be considered-i.e. Rent paid by the employee.

If Rent paid is less than 10% of salary, or no rent is paid, the employee will not get any benefit of HRA.
.
HRA is exempt to the extent of minimum of
1. HRA
2. Rent Paid-10% of Salary
3. 40% of Salary (50% For Metro cities.)
.
So HRA can be increased upto a reasonable level. More increase in HRA means Lesser Basic Salary. Then, Criteria 3 becomes restrictive.
.
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