HRA/CLA Exemption Derivations

By Sai Kumar, Enteg

HRA exemption is one which every one known.

The HRA exemption is works on the 3 principles/workings. i.e

1) 40% of the Basic Salary if the employee working in a Non Metro City , 50% of the Basic Salary

2) Actual HRA what the employee getting from his pay pocket

3) Actual Rent Paid - 10% of the Basic Salary.

Compute the 3 principles and take the least value among the 3 workings. The least amount is exemption amount. Subtract the least amount from the HRA which is lying in the employee Pay Pocket. The value comes out of is Taxable HRA amount

The Least of the above (HRA exemption) we can get through pay results RT Table (Wage Type:/4E4) we can`t get how these is derived through wage type but we can get this calculation through below mention logic where we can get to know how this HRA exemption is getting calculated where it is use full in showing the employee monthly Pay slip or in Income tax computation sheet generally.

We need here total 6 dummy wage types to store the values in RT table for

*--Metro HRA calculation                 (1) 50% of annual basis

                                            (2) HRA Projected / Actual

                                                         (3) Rent paid - 10 % basis

*--Non-Metro HRA calculation          (4) 40% of annual basis

                                                         (5) HRA Projected / Actual

                                                         (6) Rent paid - 10 % basis

The addition of above least Metro HRA Calculation and Non Metro HRA Calculation we will be final HRA exemption for the year (/4E4).

CLA (Company Leased Accommodation): CLA Exemption will be calculated on the base of Rent paid to landlord and 15% of annual basic the least of these two will be CLA exemption for the Year.

Two show in Pay slip or Income tax computation sheet we have to store these components in 2 different wage types as below explain method.

CLA Calculation:               (7) CLA - Rent Paid to Landlord

  (8)CLA - 15 % of Annual Basic  

Go to T. Code PE04 and INHRA function

We see one Enhancement Spot line no 2534, where we write the code to retrieve the required HRA/CLA exemption logic.

Click here to continue...

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