HRA

[Former Member]

Dear Experts

For HRA Exemption (India ) i have googled and find out the below points but i did not understand the 1st Point pls guide me

1. Rent paid in excess of 10% of basic salary.

2. Actual HRA received by the employee.

3. Forty percent of basic salary, if the location of the residence is in a non-metro city/town or 50% of basic salary, if the location of the residence is in a metro city

From the above “least of three” rule, it is clear that HRA exemption amount is determined by a number of factors — Basic pay, location of the residence, rent paid by the employee, and the HRA paid to the employee.

For Eg: my Basic is 15000 living in metro city where my HRA is 50 of basic  i,e  7500  now  will i get 7500 as tax exemption ???  or lesser than that ????or more than that??

[Sanky · Accepted solution]

Hi Giri,

I am taking your example for the calculation.

Your Basic:- 15000

Actual HRA:-7500

Rent Paid:-2000 pm and staying in metro city.

So calculation would be three different way to recheck which one less.

Metro HRA eligibility (Annual)= 7500+(7500*11)= 90000

Metro HRA Basis eligibility(Annual)= 15000+(15000*11)= 180000

Checking 1st Condition:- 50% HRA Basis

= 180000* 50.00 /100= 90000

2nd Condition:- Actual HRA eligibility = 90000

3rd Condition:-  Annual Rent - 10 % of ( HRA Basis/ HRA Eligibility)= 24000- 10%(180000)

= 24000- 18000

=6000

So HRA exemption he will get 6000 for the financial year.

Hope so it's clear your doubt.

Regards,

Sankarsan

[former_member201807 · Accepted solution]

As per Income tax act employee will the HRA exemption of the following:-

Actual HRA received by the employee- In your salary slip HRA component are mention & their amount are also mentioned.

In your case HRA =7500/-

2. 50% of Basic (if in metro i.e. Delhi, Mumbai, Kolkata & Chennai Only) / 40% of basic (if in non-metro i.e. Other cities)
3. Rent paid minus 10% of basic
Example-         

Basic Salary         = Rs. 15000

HRA =Rs. 7500

Condition 1- HRA mentioned in your salary slip i.e. your eligibility is Rs. 7500/- per month

Condition 2- 50% of Basic i.e. your eligibility is Rs. 15000*40% = Rs.6000/- per month (suppose you are stay in non-metro)

Condition 3-Rent paid -10% of basic i.e. 10000-10% * 15000 i.e. Rs. 8500/-

Suppose you are stay in rent & the rant amount is Rs. 10000

From the above “least of three” rule,

Therefore HRA exemption limit is Rs. 6000/-per month

Regards,

Rakesh

[Former Member]

Hi Giri,

Sankarsan explain very well, if you have any doubt run the payroll with log and check the function INHRA in the log and you can understand the process and calculation too.

Regards,

Praneeth kumar

[Sanky]

Hi,

Giri..

I think your doubt is cleared now.

Regards,

Sankarsan

[Former Member]

Hi

i didnot understand the below two steps  pls guide me  how did u do the calculation

Metro HRA eligibility (Annual)= 7500+(7500*11)= 90000

Metro HRA Basis eligibility(Annual)= 15000+(15000*11)= 180000

[Sanky]

HI Giri,

First one calculate HRA which employee will be received.

Second HRA basis (it's employee basic salary whivh he will be received in the financial year).

Regrads,

Sankarsan

[sai_siva]

Hi Giri,

Here the HRA is projected like:

HRA of current plus HRA of projected months - 7500+(7500*11) = 90000 as this is the start of the financial year ie April month

The same will be different for other period eg say July ( which is fourth period in financial year) so for that 7500+(7500*8) = 67500

Similarly for basis amount - Current month+Projected months.

Current month basis - 15000

Projected basis for next months -15000*11

Total =  180000

And other calculations is as briefed by Sankarsan, here the HRA exemption is always least of the three  so system picks 6000/- for exemption.

Thanks

Sai

[Former Member]

Yes but HRA is 50% of basic if metro then 50%15000

= 7500 rit so i did not understand the calculation how 11 % came into picture pls let me know

[Sanky]

H Giri,

Employee will get 50% HRA on basic.

If basic is 15k in IT8 then HRA would be 7500.

Now come to calculating if employee is in metro cities where he is paying rent amount 2000 pm.

now go back to my 1st reply , will be calculation.

Now your second question. 11 is project factor. Suppose you are running payroll for the month April then you to project next 11 month and based on that tax calculation happens(if you know).

if you will run May then project factor will 10.

You please go through tax calculation process from there you will get the idea how tax are calculating and same thing SAP has included in the system as per India.

Regards,

Sankarsan

[Former Member]

Hi Sankarsan

Thank you very much for  the inputs  will looking into the taxation part as well