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HRA in India: An Overview
In India, the maximum permissible House Rent Allowance (HRA) is not strictly defined by a specific percentage of the gross salary, as it can vary based on company policies and individual employment agreements.
HRA Percentage
Typically, HRA can range from 40% to 50% of the basic salary, depending on whether the employee resides in a metro city or a non-metro city. For cities like Ahmedabad in Gujarat (which is not classified as a metro), HRA is usually around 40% of the basic salary.
Tax Exemption
When calculating tax exemptions, the HRA received is subject to certain conditions, and the exempt amount is determined by:
- Actual HRA received
- Rent paid minus 10% of basic salary
- 50% of the salary (for metro cities) or 40% (for non-metro cities)
Company Policy Discretionary
Ultimately, the percentage of HRA is determined by the employer's compensation structure. Companies may have their own policies that might allow for higher or lower HRA percentages.