Table of Contents
House Rental Allowance (HRA)
Updated on 6 December 2022
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House rental allowance is another important salary component in the CTC structure. Unlike basic salary, HRA is not fully taxable. The basic reason for the HRA allowance is to avail the tax exemption for the salaried employees for the rent expenses they incurred. As per the name HRA, it is implicit that the allowance is paid for the house rent expenses met by the salaried individuals.
But the HRA allowance is not fully exempt in all cases as it follows the concept of expenses vs the allowance received.
The following are the 3 conditions to avail of the HRA exemption and the least amount out of all the three is taken for the tax exemption.
Since the third condition is that 50% of basic is taken for HRA exemption calculation, most of the companies follow the same salary structure while arriving at the House Rental Allowance. The same standard practices have been followed in OfficePortal, arriving at the HRA allowance. Click here to learn more about OfficePortal Payroll Software.
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