HRA GIVEN BY AN EMPLOYER IS EXEMPTED FROM TAX..

IF HRA IS USED FOR RENTAL PURPOSE THE HRA AMOUNT EXEMPTED FOR IT IS BASED UPON THE following CRITERIA..

The actual HRA offered will be the lowest of the following three provisions:

   1. The amount received as the HRA from the employer.

  2.  Actual rent paid less 10% of the basic salary.

  3.  50% of the basic salary if staying in a metro city and 40% in a non-metro city.

THE LOWEST OF THE ABOVE THREE IS THE HRA FOR EXEMPTION..

For e.g..the basic pay of a PA is 9910 (2400 GP)

DA is 125%

Rent declaration is 3000/- per month.

Working in non metro station.

         Point 1; 

 10% of basic is HRA IN C Class city.

9910*10%. = 990/-

990* 12 = 11880/-@A


         POINT 2

Rent paid : 5000*12: 60000/-

10% of salary ;
Basic.          9910
DA.  
@ 125 %     12387
                   ------------
                    22297
                    ------------
10% of salary ; 2230*12.  ; 26760.

Rent paid in excess of 10% of salary is

60000 - 26760; *

33240@ B

       POINT 3

40% of basic ;9910*40%* 12;; 

47568. @ C

A is the least of all three.. So only 11880 is exempted.