House Rent Allowance or HRA is a salary component paid to employees by an employer towards the accommodation cost of living in that city.
7th Pay Commission: It's a double bonanza for the Central government employees. After the fat Diwali bonus, it's time for them to get a hike in their salary from January 2022, if some media reports are to be believed. The Ministry of Finance is working towards implementing the House Rent Allowance (HRA) of more than 11.56 lakh employees from January 1, 2021.
This proposal has also been sent to the Railway Board for their approval. Indian Railways Technical Supervisors Association (IRTSA) and the National Federation of Railwaymen (NFIR) have been demanding to implement the House Rent Allowance (HRA) from January 1, 2021.
If the Finance Ministry accepts the demand then the HRA of lakhs of employees will increase along with getting arrears. These benefits can range from Rs 5400 to Rs 8100 per month. As per the 7th Pay Commission, the salary of each level employee increases with their DA and HRA increase.
What is HRA?
House Rent Allowance or HRA is a salary component paid to employees by an employer towards the accommodation cost of living in that city.
Employers decide the HRA amount to be paid depending on criteria like the salary structure, salary amount and city of residence.
Even though it is a part of your salary, HRA isn't entirely taxable, subject to conditions (a percentage of HRA is exempted under Section 10 (13A) of the IT Act, 1961).
You can discuss this with your employer to ensure that you save the maximum tax allowed as per the Income Tax Act.
HRA deduction calculation for employees residing in a metro will be 50% of the basic salary and is 40% for residence in a non-metro city.
In case of salaried individuals without a DA component or commissions in their remuneration, the HRA allowance will be 40 or 50% of their basic pay.
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