HRA as part of salary

As such there is no limit on payment of sum as HRA to an employee provided the sum paid is in due regard to his salary/ location where the employee resides. However, out of the sum received by an employee as HRA, the least of the following shall be exempt from tax from the salary of employee-

1. 50% of basic salary (if house is situated in metropolitan city)/ 40% of basic salary (if house situated at any other place)

2. HRA received by the employee

3. excess of rent paid over 10% of basic salary.