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Calculate HRA Exemption

Salary = Basic Salary + dearness allowance if terms of employment provide for it + commission based on a fixed percentage of turnover achieved by the employee.
( Basic Salary + D.A + Commission based on fixed percentage on turnover )

Example:
Basic Salary = 60,000/- [5000 per month * 12]
Dearness Allowance (D.A) = 12000/- [1000 per month * 12]
House Rent Allowance (H.R.A.) = 24000/- [2000 per month * 12]
Actual Rent Paid = 18000/- [1500 per month * 12]

So:
Salary = Basic Salary + D.A + Commission based on fixed percentage on turnover
60000 + 12000 + 0 = 72000/-
HRA = 24000/-
House rent paid = 18000/-

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

  1. Actual house rent allowance received from your employer.
    HRA = 24000/-
  2. Actual house rent paid minus 10% of your basic salary.
    HRA – 10% of (Salary) = 
    18000 – (10 % 72000) = 18000 – 7200 = 10800/-
  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.40 % 72000 = 28800/- (for non-metro)

Minimum of above (10800/-) is allowed as income tax exemption on house rent allowance.

Therefore, 10800/- shall be exempt

And the balance [24000(HRA) – 10800 = 13200] 13200/- shall be included in gross salary for tax deduction.

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