HRA should be calculated on Basic salary , is it possible to choose the % , Like our organization has HRA 20% on basic , Can it be done If yes then why 20% Why not 40%. Kindly let me on the same.
From India, Trivandrum
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HRA or The House Rent Allowance serves as a crucial component of an individual's salary. It defines the total amount allotted by the employer towards the employee's accommodation as rent. The amount allotted for HRA proves to be beneficial for an employee as it is calculated for tax deductions for a particular financial year. HRA also helps in reducing the taxable income that you are liable to pay. The tax benefits associated with HRA are only applicable for those salaried individuals who stay in a rental accommodation. If an employee stays in his or her own house, he or she is not eligible to claim the amount for tax deductions.
Calculation of HRA is based on a number of factors, such as the entitlement to 50% of the basic salary, if the employee is residing in a metro city and 40% in case he/she stays in any of the other cities. The calculation of HRA for tax benefit is considered from any of the following three listed provisions:
• The actual rent that is paid should be less than 10% of the basic salary.
• In case you’re staying in a metro, 50% of the basic salary and 40% if you live in a a non-metro city.
• The actual amount allotted by the employer as the HRA.
The least of the aforementioned amount will be considered for tax deduction from HRA.

From India, Madras

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