Calculation of hra

Dear Mohan,

Please Refer Below

HRA will be available up to the the minimum of the following three options:

1. Actual house rent allowance received from your employer
2. Actual house rent paid by you minus 10% of your basic salary
3. 50% of your basic salary if you live in a metro or 40% of your basic salary if you live in a non-metro

This minimum of above is  allowed as income tax exemption on house rent allowance.

Meaning of Salary for calculation the exemption of HRA

• Salary means (Basic + D.A + Commission based on fixed percentage on turnover).
• Salary is to be taken on due basis in respect of the period during which the period accommodation is occupied by the employee in the previous year.

HRA exemption will be calculated based on the below criteria.

(A) Amount received as HRA from employer.

(B) Excess of rent paid over 10% of Basic Salary (Rent Paid - 10% of Basic Salary)

(C) 40% (50% in case of Metro City) of Basic Salary

HRA exemption will be Minimum of A,B,C. Rest of the amount will be considered as taxable HRA.

HRA can be calculated as follows:

1) Actual house rent allowance recieved.

2) Rent -10%of salary.

3) 40% (50% for metro cities) of the salary.

whichever is less out of the above three should be deducted from your actual HRA received  

Salary for HRA:

basic salary + dearness allowance + commission received.