Dear Friends,
I have a doubt on HRA. Can we calculate HRA on GROSS SALARY while preparing the CTC breakup? As far as my knowledge is concern HRA is calculated on BASIC Salary. Please give your comments on this... It's a little urgent..
Looking forward to some prompt responses friends..
From India, Pune
2I have a doubt on HRA. Can we calculate HRA on GROSS SALARY while preparing the CTC breakup? As far as my knowledge is concern HRA is calculated on BASIC Salary. Please give your comments on this... It's a little urgent..
Looking forward to some prompt responses friends..
From India, Pune
Hi,
You are right! HRA is a subsidisery allowances and it has to be considered on basis and not on gross. Gross is the sum of all the payable factors and allowance, either in monthly of daily mode.
As per The Minimum HRA Act, the HRA should be at least 5% of the Basic. In such a case, you can have certain % (not less than 5%) as HRA on Basic and which will be the part of your gross salary structure.
Hope you will find it helpful.
Regards,
Atul S Malve
Manager- HR & Admin
From India, Sholapur
You are right! HRA is a subsidisery allowances and it has to be considered on basis and not on gross. Gross is the sum of all the payable factors and allowance, either in monthly of daily mode.
As per The Minimum HRA Act, the HRA should be at least 5% of the Basic. In such a case, you can have certain % (not less than 5%) as HRA on Basic and which will be the part of your gross salary structure.
Hope you will find it helpful.
Regards,
Atul S Malve
Manager- HR & Admin
From India, Sholapur
HRA is calculate on Basic + DA amount of wages and it is 40 % for Non-Metro cities and 50 % for Metro Cities.
and after that for the purpose of Tax Exemption, there are certain rules of HRA....
pradeep
From India, Gurgaon
and after that for the purpose of Tax Exemption, there are certain rules of HRA....
pradeep
From India, Gurgaon
Hi Sir,
Is there any percentage fixed for HRA in salary structure (If the answer is yes where exactly it is defined). Can we change the percentage of salary component from employee to employee keeping his tax benefit is concerned or whether it should be uniform to all the employees.
Please advise.
Regards
Vinutha
From India, Bangalore
Is there any percentage fixed for HRA in salary structure (If the answer is yes where exactly it is defined). Can we change the percentage of salary component from employee to employee keeping his tax benefit is concerned or whether it should be uniform to all the employees.
Please advise.
Regards
Vinutha
From India, Bangalore
The there thread was started in 2011 and it is good that it is still alive.....
HRA is a component of salary. It is included in the salary to make the employee eligible to get some tax benefits. (The basic idea now a days is not tax benefits but to reduce the burden of the employers from certain statutory contributions like, PF, Gratuity, Bonus etc..! That is why they are paying HRA without any reference to the where the employee stays, whether in rented house or owned house and whether the spouse is getting HRA or not etc etc)
To be legally correct, the HRA should be based on Salary. Here the salary should be gross salary and not merely basic salary. HRA should not be at the same percentage for all the employees. It shall depend upon the city of residence. As stated above, it should be paid only to those who resides in rented house. There are some conditions like you can stay with your parents and pay rent to parents but you can not claim rent for staying in a house owned by your spouse or rented out by the spouse. Income Tax exemption is based on three parameters and shall be the least of the following:
(1)The actual rent that is paid should be less than 10% of the basic salary (Basic salary shall include dearness allowances, other allowances including commission based on sales)
(2) In case you’re staying in a metro, 50% of the basic salary and 40% if you live in a a non-metro city.
(3) The actual amount received as the HRA from the employer.
The above being HRA exemption factors, will not influence your salary structuring. In salary structuring, therefore, a common understanding is available and that is a certain percentage of the your basic salary. Still, when you pay it across all the employees, the objective of paying HRA will be defeated. It is seen that even in the case of employees whose salary will not come under IT brackets are paid huge amount as HRA just to reduce the employer's contribution to PF or gratuity. This may have a negative effect in future if any one objects to it. Therefore, it is advisable to pay HRA only to those who actually resides in rented houses. Then it will become an allowances out of the purview of salary.
From India, Kannur
HRA is a component of salary. It is included in the salary to make the employee eligible to get some tax benefits. (The basic idea now a days is not tax benefits but to reduce the burden of the employers from certain statutory contributions like, PF, Gratuity, Bonus etc..! That is why they are paying HRA without any reference to the where the employee stays, whether in rented house or owned house and whether the spouse is getting HRA or not etc etc)
To be legally correct, the HRA should be based on Salary. Here the salary should be gross salary and not merely basic salary. HRA should not be at the same percentage for all the employees. It shall depend upon the city of residence. As stated above, it should be paid only to those who resides in rented house. There are some conditions like you can stay with your parents and pay rent to parents but you can not claim rent for staying in a house owned by your spouse or rented out by the spouse. Income Tax exemption is based on three parameters and shall be the least of the following:
(1)The actual rent that is paid should be less than 10% of the basic salary (Basic salary shall include dearness allowances, other allowances including commission based on sales)
(2) In case you’re staying in a metro, 50% of the basic salary and 40% if you live in a a non-metro city.
(3) The actual amount received as the HRA from the employer.
The above being HRA exemption factors, will not influence your salary structuring. In salary structuring, therefore, a common understanding is available and that is a certain percentage of the your basic salary. Still, when you pay it across all the employees, the objective of paying HRA will be defeated. It is seen that even in the case of employees whose salary will not come under IT brackets are paid huge amount as HRA just to reduce the employer's contribution to PF or gratuity. This may have a negative effect in future if any one objects to it. Therefore, it is advisable to pay HRA only to those who actually resides in rented houses. Then it will become an allowances out of the purview of salary.
From India, Kannur
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