How to claim house rent exemption from income tax?

Is this sample calculation for exemption due to house rent correct? Suppose the basic pay (sum of grade pay and pay in pay band) is 23000, GDA is 10000 and HRA received is 3500. The limit of HRA husband and wife can get is 6000 and in this case wife does not claim IT exemption due to house rent. Now exemptions is least of the 3 options: actual HRA received, actual rent paid (4000) - 10% of (basic), 40% of basic. I have doubt about "basic" salary. In salary slip basic is defined as sum of grade pay and pay in pay band but probably IT department means basic salary =(grade pay+pay in pay band+GDA) if that is so, check that the second option gives 4000-10% of 33000)=700 per month. Is this sample calculation correct? If not then how should it be calculated? Second, if the person claims exemption, how to include this Rs700? One website says, the amount of HRA received - 700 =2800 will be added to taxable income. What does that mean? Actual HRA received to be first excluded from income and then this 2800 to be added as effective HRA? While calculating total income, actual HRA had been added to total taxable income (in form 16) and employer was not informed about house rent exemption. Can this be corrected at this stage (while calculating self assessment tax)?