HRA calculation is a part of DA or dearness allowance is calculated as a specific percentage of the basic salary which is then added to the basic salary along with other components like HRA (House Rent Allowance) to make up the total salary of an employee. There is no single procedure to arrive at Salary Breakup and there are different methods followed by different organizations. HRA or House Rent Allowance is the salary component given by a company to an employee in order to meet expenses related to the renting of accommodation which the employee takes for residential purposes. HRA is applicable to both employees from the private sector as well as the public sector whereas DA is majorly applicable to employees working in the public sector.
HRA calculation online is an employee can request House Rent Allowance (HRA) to meet your rented accommodation-related expenses. Employee’s who live in a rented house can request this exemption for taxes.HRA can be fully or partially exempt from tax. If an employee does not live in a rented accommodation but still get house rent allowance, the allowance will be fully taxable.
HRA calculation in INDIA
Dearness Allowance is awarded to the employee against the price rise to mitigate the impact of inflation .Rules are that Employee cannot claim for the full rental amount he’s paying. The exemption is based on the least of the actual amount allotted by the employer as the HRA and Actual rent paid less 10% of the basic salary.
DA calculation in salary
Dearness Allowance as per 7th CPC Basic Pay= (Avg of CPI-IW for the past 12 months – Average of CPI-IW recorded in 2015)*100/(Average of CPI-IW recorded in 2015)
7th pay commission, new formula to calculate dearness allowance.
= ((12 Months Average of AICPIN)-261.4)*100/261.4)
The HRA should not be more than 50% of salary following with an example
If an employee
Basic Salary – Rs. (5000*12) – Rs. 60,000/-
Dearness Allowance (D.A) – Rs. (1000*12) – Rs. 12000/-
House Rent Allowance (H.R.A.) – Rs. (2000*12) – Rs. 24000/-
Actual Rent Paid – Rs. (2000*12) – Rs. 24000/-
Minimum amount to exempt from taxes
Actual HRA received (2000*12) – Rs. 24000/-
Rent amounted in extra of 10% of salary (24000-7200) – Rs. 16800
40% of Salary – Rs. 28800/-
Rs. 16800 should be excluded and the balance Rs. 7200 to be combined in the wage
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