House Rent Allowance { HRA }

HRA stands for House Rent Allowance. It is one of the various components of salary structure in Indian Payroll. It is an allowance that is paid by the employer to employees in addition to the basic salary. This is done to help employees with tax benefits towards accommodation expenses every year. The amount of HRA is decided by the employer on the basis of employee residence.

Few factors that affect HRA:

  1. The HRA offered to employees will be the lowest of the following three provisions:
  2. The actual amount paid as rent should be less than 10% of the basic salary.
  3. In case an employee stays in a metro city, 50% of the basic salary and 40% if the employee lives in a non-metro city.
  4. HRA issued cannot exceed 50% of an employee’s salary.
  5. One can also avail of tax benefits pf HRA along with a home loan.

If annual rent paid by an employee exceeds INR 1,00,000/- then there is a need to submit the landlord’s PAN card. If the landlord does not have a PAN card, a self-declaration needs to be submitted.