Salary Structure [Thread 6447]

What is percentage of HRA of Basic Salary?

Hi Sapna...
The HRA Percentage varies from 20% to 40% of basic depending on the city.
I our company for B & C Grade cities 20% HRA is paid on Basic+DA
In A grade cities i.e. Ahmedabad / Pune / Hyderabad etc 30% HRA on Basic + DA
Metro /Expenbsive Cities 40% HRA on Basic + DA is paid (Bangalore/Mumbai/Delhi/Kolkatta/Chennai)
The special HRA allowances are paid to employees working in Srinagar and northeastern states.

Hi Sapna,
Please refer to Income Tax Act (49th edition 2005) , on page 1.58 under Rule 2A clearly specifies that HRA for four major cities viz Mumbai, Calcutta, Delhi & Madras is 50% of Basic Salary & DA and 40% for other cities.
Cheers,
Rajat Joshi

i would attempt to answer this question in the following manner:

* HRA is dealt under in the INCOME TAX act and rules provide for specific dispensation based on the cities where-in the HRA is provided.

* the other way to deal with HRA is the value that the company wants to put on it based on its compensation philosophy and the locational specificity. ideally HRA should be anything between 12% to 15% of the total employment cost. this treatment points to the 40% - 50% of basic salary (congruent with the IT dispensation) - considering the fact that basic salary itself is upto 30%-33% of the total employment cost. further, depending upon the very fact on what percentage of total employment cost the basic salary is based upon, higher percentages (more than 50% - going upto 100% of basic salary) are also seen in the industry - where the basic salary is lower. lower percentages (upto 10% - in case of workmen/psu's/government -where normally basic salary is much higher component) are also prevalent.

regards,

mxsingh