How to Calculate Home Rent Allowance (HRA) From Basic Salary?

Short tutorial on how to calculate home rent allowance (HRA) from basic salary.

HRA Calculation

HRA or the House Rent Allowance is an amount paid by the company to its employees as a part of their salaries. It is an allowance provided towards the accomadation every year. The House Rent Allowance (HRA) provides employees with tax benefits. The HRA calculation differs for different companies.

This is a short tutorial on how to calculate House Rent Allowance (HRA) from the basic salary of an employee.
Each company have their own standard of HRA calculation. Given here is one of the common method. The calculation varies for metro and non-metro work places.
How To Calculate House Rent Allowance Hra

If Basic Salary x 0.4 < (Salary - Basic - PF - ESI), then HRA = Basic x 0.4
Salary - Basic - PF - ESI
House Rent Allowance Hra Formula
Step 1:
Consider an employee whose CTC is Rs.30000/- . His Basic Salary is Rs.10,000/- PF - 3000/-, ESI - 1000. Calculate the House Rent Allowance (HRA).
CTC Salary = Rs.30,000
Basic Salary = Rs.10,000
PF = Rs.3,000
ESI = Rs.1,000
Step 2: Find Basic x 0.4
Apply the values in the formula,
Basic x 0.4
10000 x 0.4 = 4000
Hra Basic
Step 3: Find Salary - Basic Salary - PF - ESI
Salary - Basic Salary - PF - ESI = 30000 - 10000 - 3000 - 1000
Salary - Basic Salary - PF - ESI = 16000
Salary Basic Pf Esi
Step 4: Find the greater value
It is shown that, Basic x 0.4 is lesser than Salary - Basic Salary - PF - ESI.
House Rent Allowance (HRA) = Basic x 0.4 = Rs.4000
Hra Calculation

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