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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
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
We need here total 6 dummy wage types to store the values in
RT table for
*--Metro HRA calculation
(1) 50% of annual
(2) HRA Projected /
(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).
(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.
(7) CLA - Rent Paid to Landlord
- 15 % of Annual Basic
Go to T. Code PE04 and INHRA
We see one Enhancement Spot line no 2534, where we write the code to
retrieve the required HRA/CLA exemption logic.
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