What is the meaning of salary w.r.t. hra?

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Solomon (Querist)
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29 December 2016 Sir,
Can anyone clear my following doubts. Thanks in advance.
1. The meaning of Salary is Basic + DA (is this correct)
2. What about the DA arrears received during the year. Should that also be included in Salary?
3. What about the amount received by way of Surrender i.e. Earned leave. Should that also be included in Salary?
Query 1:
Basic + GP = Total + DA + HRA = Total
12000 + 4800 = 16800 + 22200 + 1000 = 40000

Query 2:
Suppose if DA Arrears received during the year is 3000 should that be added with Salary?

Query 3:
If I received Earned Leave as 20000, should that be added with Salary?

Thank you for your time.

ND (Expert)
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29 December 2016 The answer to all your questions is yes. All of these should be added to the total salary.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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29 December 2016 If u are taking about HRA exemption -
1. answer to Q-2 is yes
2. answer to Q-3 is no.
Inference rule 2(h) of IT Rules,1962.

Solomon

Solomon (Querist)
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29 December 2016 Thank you ND.
Thank you Mr.Chackrapani Warrier you have rightly pointed out, I was clarifying about HRA Exemption.

Solomon

Solomon (Querist)
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29 December 2016 Another doubt.. suppose HRA of Rs.500 is deducted from my Earned leave of Rs.20000 during the year.
Should I include this HRA (Rs.500) also for tax exemption?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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03 August 2025 Great questions! Let me clarify each point regarding **Salary** and **HRA** for tax purposes:

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### 1. What is the meaning of **Salary** w\.r.t. HRA exemption?

For the purpose of **House Rent Allowance (HRA) exemption**, **Salary** generally includes:

* **Basic Salary**
* **Dearness Allowance (DA)** *if it forms part of retirement benefits*
* Other allowances that are part of salary (like **Dearness Pay** if applicable)

**So yes, Basic + DA (if it is considered for retirement benefits) is included in Salary for HRA exemption.**

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### 2. What about **DA arrears received during the year**?

* DA arrears are considered part of salary for the year in which they are received.
* **DA arrears received during the year should be included in Salary for calculating HRA exemption.**
* This is important because your HRA exemption depends on actual salary earned during the year.

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### 3. What about **Earned Leave Encashment (Surrender amount)?**

* Earned leave encashment is a **retirement benefit** and is **not included as salary for HRA exemption**.
* **It is taxable under a separate head and treated differently from salary for HRA purposes.**

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### 4. About the **HRA deduction from Earned Leave amount**

* If **HRA of Rs.500 is deducted from your Earned Leave encashment**, this does **not affect HRA exemption on salary**.
* You only consider **HRA received as part of salary** for exemption calculation.
* Deducting HRA from Earned Leave encashment does not mean you get exemption on that Rs.500.
* Only actual HRA paid (received in salary) counts for exemption.

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### **Summary:**

| Income Component | Included in Salary for HRA? | Comments |
| ------------------------------ | --------------------------- | --------------------------------------- |
| Basic Salary | Yes | Included |
| Dearness Allowance (DA) | Yes (if retirement benefit) | Included if part of retirement benefits |
| DA Arrears received | Yes | Included as salary in year received |
| Earned Leave Encashment | No | Not included for HRA exemption |
| HRA deducted from Earned Leave | No | Not considered for HRA exemption |

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If you want, I can help you with the exact **HRA exemption calculation** based on your salary breakup. Would you like that?

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