Salary Structure Dilemma: Is It Legal to Set HRA at 20% of Basic in Delhi-NCR?

We are currently thinking to modify the salary structure and give 70% of gross as Basic and 20% as HRA. Is it completely up to the company to decide, or is there any law governing this? The company is based in Delhi-NCR.

What are the implications? Is it okay to give 20% as HRA?

Hi,

Yes, you can consider HRA as 20%. There are no rules to restrict HRA. However, if an employee falls under the taxable bracket, their Income Tax will be higher.

According to the Income Tax regulations, the exemption for HRA is 40% for Non-Metro areas and 50% for Metro areas.