Confused About HRA Calculation: Is It Based on Basic or Basic Pay?

Hi, can anybody help me to calculate the HRA? Is HRA calculated from Basic or from Basic Pay (meaning Basic + DA)?

Thank you!

My doubt is whether 40% is calculated from the Basic only or from (Basic + D.A). Please reply.

As per the Income Tax regulations, we would like to clarify the definition of "Salary" when calculating HRA. "Salary" for this purpose will include dearness allowance if it contributes to retirement benefits and commission; however, it excludes all other allowances and perquisites.

Please refer to the attached file for more detailed information regarding HRA. We hope this will be beneficial to you.

Thank you.

Understanding Salary Breakup for HRA Calculation

Salary breakup is done to avail various sorts of benefits from both the employee and employer perspectives. There is no hard and fast rule that requires employers to define the salary breakup.

Generally, HRA is calculated as 40% of the basic salary in non-metro cities and 50% of the basic salary in metro cities. If you want to calculate HRA excluding basic + DA, you can do so. However, once you have done it, make sure you continue to follow the same method. Seniors may be able to provide more insight on this.

Regards

As per the Income Tax Act, for the calculation of House Rent Allowance (HRA), the least of the following is available as a deduction:

- Actual HRA received
- 50% (for metro cities) or 40% (for non-metro cities) of basic salary + DA
- Actual rent paid minus 10% of basic salary + DA

The amount which is less will be exempted for HRA exemption.

Metro Cities

Metro cities include Delhi, Mumbai, Chennai, and Kolkata.

Regards,
Srini