So far as I know there's no restriction such that the HRA cannot exceed the basic pay, except that the Minimum wages, category wise should be adhered to. It can be consolidated or split into different components such as basic, FDA/VDA, HRA and allowances etc. The stipulation/formula w.r.t. HRA, it is relevant to the limits within which the relief under IT act is permissible as calculated when the HR is claimed as actually paid whichever is lower. There need not be any limitation that HRA cannot be more than the basic. In fact in cities like Mumbai, Delhi HR can be more than the basic itself. For instance we have seen some celebrities were drawing just Re.1 as salary/remuneration.
From India, Bangalore
1077From India, Bangalore
Dear colleague,
To my knowledge , there is no restriction as to the quantum of HRA being paid to an employee except in the state of Maharashtra the state Government has enacted a legislation called THE MAHARASHTRA WORKMEN’S MINIMUM HOUSE RENT
ALLOWANCE ACT,1983.
(MAHARASHTRA ACT NO.XXIII OF 1988) which provides for payment of minimum house-rent allowance to workmen who come under the purview of Minimum wages .
COMPUTATION OF minimum HRA in Maharashtra as per act is as below:
Every workmen is entitled at the rate of 5% of the wages payable to him during the month of his service or Rs 20 whichever is higher and shall be payable within 10 days of the following month
Wages means Basic + DA (Dearness Allowances)
The payment of HRA is to be made in cheque along with his monthly wages
In general, for most employees, House Rent Allowance (HRA) is a part of their salary structure. Although it is a part of your salary, HRA, unlike basic salary, is not fully taxable. Subject to certain conditions, a part of HRA is exempted under Section 10 (13A) of the Income-tax Act, 1961.The amount of HRA exemption is deductible from the total income before arriving at a taxable income. This helps an employee to save tax
Please check your state legislation if any dealing with minimum HRA payable before going ahead fixing the HRA
Panchsen
P.Senthilkumar
9884009193
From India, Chennai
To my knowledge , there is no restriction as to the quantum of HRA being paid to an employee except in the state of Maharashtra the state Government has enacted a legislation called THE MAHARASHTRA WORKMEN’S MINIMUM HOUSE RENT
ALLOWANCE ACT,1983.
(MAHARASHTRA ACT NO.XXIII OF 1988) which provides for payment of minimum house-rent allowance to workmen who come under the purview of Minimum wages .
COMPUTATION OF minimum HRA in Maharashtra as per act is as below:
Every workmen is entitled at the rate of 5% of the wages payable to him during the month of his service or Rs 20 whichever is higher and shall be payable within 10 days of the following month
Wages means Basic + DA (Dearness Allowances)
The payment of HRA is to be made in cheque along with his monthly wages
In general, for most employees, House Rent Allowance (HRA) is a part of their salary structure. Although it is a part of your salary, HRA, unlike basic salary, is not fully taxable. Subject to certain conditions, a part of HRA is exempted under Section 10 (13A) of the Income-tax Act, 1961.The amount of HRA exemption is deductible from the total income before arriving at a taxable income. This helps an employee to save tax
Please check your state legislation if any dealing with minimum HRA payable before going ahead fixing the HRA
Panchsen
P.Senthilkumar
9884009193
From India, Chennai
Prof. Kumar.s
Sir, I have due respect for you. You are a Professor and Consultant in Tax, Law and HR matter. But the links you forward are irrelevant to the subject matter. Moreover, there is no surety as to the correctness in what is written there.
Maharashtra there is law to give minimum HRA of 5% when you have more than 50 employees. This law speaks about minimum HRA.
Question in this discussion topic is how much HRA we can give or can we exceed it the Basic Salary.
Income Tax law is nothing to do here. Income Tax law only permits you exemption for Income Tax maximum 50% in metro cities and 40% in other cities.
If you read and answer the points which I raised in my earlier post, you will get answer to the query.
Please do not take it otherwise. We are here to take the knowledge from each other and I am trying to give clarity in the subject matter out of my little bit exposure in the field.
I never claim that I am right or always right. No one is perfect including me but it will be appreciated if the clarity in subject is bought through direct valid supporting and through various links.
From India, Mumbai
Sir, I have due respect for you. You are a Professor and Consultant in Tax, Law and HR matter. But the links you forward are irrelevant to the subject matter. Moreover, there is no surety as to the correctness in what is written there.
Maharashtra there is law to give minimum HRA of 5% when you have more than 50 employees. This law speaks about minimum HRA.
Question in this discussion topic is how much HRA we can give or can we exceed it the Basic Salary.
Income Tax law is nothing to do here. Income Tax law only permits you exemption for Income Tax maximum 50% in metro cities and 40% in other cities.
If you read and answer the points which I raised in my earlier post, you will get answer to the query.
Please do not take it otherwise. We are here to take the knowledge from each other and I am trying to give clarity in the subject matter out of my little bit exposure in the field.
I never claim that I am right or always right. No one is perfect including me but it will be appreciated if the clarity in subject is bought through direct valid supporting and through various links.
From India, Mumbai
I wonder any employee's (worker's) salary is governed by Minimumwages act 1948. Basic pay +v.d.a (variable dearness allowance) =MINIMUM WAGE. IT SHOULD NOT NEVER BE LESS THAN MINIMUWAGE AS FIXED BY STATE GOVERNMENT OR CENTRAL GOVT OR BY THE COLLECTOR AND DISTRICT MAGISTRATE OF THAT DISTRICT.
THIS IS ONLY BINDABLE BY EMPLOYER OF ANY FACTORY OR ESTABLISHMENT.
THE MANAGEMENTS ARE ONLY RESPONSIBLE FOR PAYMENT OF M. W. OR
ANY OFFERED PAYSCALES BY THEM AS A COMPANY'S OWN INTEREST.
HRA OR ANY SPL.PAYS LIKE WEEKEND PARTY JOSH EXPENSES. OR MEDICAL ALLOWANCE OR T. A ..etc OR ONLY PAYING TO EMPLOYEES AS A BOOST.
From India, Nellore
THIS IS ONLY BINDABLE BY EMPLOYER OF ANY FACTORY OR ESTABLISHMENT.
THE MANAGEMENTS ARE ONLY RESPONSIBLE FOR PAYMENT OF M. W. OR
ANY OFFERED PAYSCALES BY THEM AS A COMPANY'S OWN INTEREST.
HRA OR ANY SPL.PAYS LIKE WEEKEND PARTY JOSH EXPENSES. OR MEDICAL ALLOWANCE OR T. A ..etc OR ONLY PAYING TO EMPLOYEES AS A BOOST.
From India, Nellore
In the new Code on wages, the definition of wages has been given in section 2 (y) which reads as under -
"2(y) "wages" means all remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,-
(i) basic pay;
(ii) dearness allowance; and
(iii) retaining allowance, if any,
but does not include-
(a) any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;
(b) the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;
(c) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;
(d) any conveyance allowance or the value of any travelling concession;
(e) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment;
(f) house rent allowance;
(g) remuneration payable under any award or settlement between the parties or order of a court or Tribunal;
(h) any overtime allowance;
(i) any commission payable to the employee;
(j) any gratuity payable on the termination of employment;
(k) any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment:
Provided that, for calculating the wages under this clause, if payments made by the employer to the employee under clauses (a) to (i) exceeds one-half, or such other per cent as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent, so notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause:
Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f), (g) and (h) shall be taken for computation of wage.
Explanation.- Where an employee is given in lieu of the whole or part of the wages payable to him, any remuneration in kind by his employer, the value of such remuneration in kind which does not exceed fifteen per cent. Of the total wages payable to him, shall be deemed to form part of the wages of such employee;"
The new definition clearly underlines the emoluments which will form part of wages and which will not form part of wages. Thus, here three components which clearly form part of wages are, (i) basic pay; (ii) dearness allowance; and (iii) retaining allowance, if any. Some components of wages have also been listed which will not form part of wages. Seen thus the Code explicitly states the HRA to be not a part of wages and also puts restriction on the non-inclusive components to be 50% and even if it exceeds so it will not have any effect on the employee rights is concerned.
The matter regarding coverage of Special allowance for EPF purpose came up for consideration before the Supreme Court recently in The Regional Provident Fund Commissioner vs Vivekananda Vidyamandir (decided on 28 February, 2019 Author: N Sinha) it held that merely by giving a nomenclature the PF coverage shall not cease and the nature of payment has to be examined. For example if it is a uniform payment made to all employees then the same would fall within the definition of wages irrespective of the name attached to it. There has been a lot of instances where to avoid PF liability, various surreal names were given.
From India, Mumbai
"2(y) "wages" means all remuneration whether by way of salaries, allowances or otherwise, expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes,-
(i) basic pay;
(ii) dearness allowance; and
(iii) retaining allowance, if any,
but does not include-
(a) any bonus payable under any law for the time being in force, which does not form part of the remuneration payable under the terms of employment;
(b) the value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the appropriate Government;
(c) any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon;
(d) any conveyance allowance or the value of any travelling concession;
(e) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment;
(f) house rent allowance;
(g) remuneration payable under any award or settlement between the parties or order of a court or Tribunal;
(h) any overtime allowance;
(i) any commission payable to the employee;
(j) any gratuity payable on the termination of employment;
(k) any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment:
Provided that, for calculating the wages under this clause, if payments made by the employer to the employee under clauses (a) to (i) exceeds one-half, or such other per cent as may be notified by the Central Government, of the all remuneration calculated under this clause, the amount which exceeds such one-half, or the per cent, so notified, shall be deemed as remuneration and shall be accordingly added in wages under this clause:
Provided further that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f), (g) and (h) shall be taken for computation of wage.
Explanation.- Where an employee is given in lieu of the whole or part of the wages payable to him, any remuneration in kind by his employer, the value of such remuneration in kind which does not exceed fifteen per cent. Of the total wages payable to him, shall be deemed to form part of the wages of such employee;"
The new definition clearly underlines the emoluments which will form part of wages and which will not form part of wages. Thus, here three components which clearly form part of wages are, (i) basic pay; (ii) dearness allowance; and (iii) retaining allowance, if any. Some components of wages have also been listed which will not form part of wages. Seen thus the Code explicitly states the HRA to be not a part of wages and also puts restriction on the non-inclusive components to be 50% and even if it exceeds so it will not have any effect on the employee rights is concerned.
The matter regarding coverage of Special allowance for EPF purpose came up for consideration before the Supreme Court recently in The Regional Provident Fund Commissioner vs Vivekananda Vidyamandir (decided on 28 February, 2019 Author: N Sinha) it held that merely by giving a nomenclature the PF coverage shall not cease and the nature of payment has to be examined. For example if it is a uniform payment made to all employees then the same would fall within the definition of wages irrespective of the name attached to it. There has been a lot of instances where to avoid PF liability, various surreal names were given.
From India, Mumbai
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HRA-Unit 2.ppt
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HRA.doc