Can someone throw some light on this? Is it mandated that the HRA has to be 50% of the basic salary?. Our current structure of salary is basic - 30% and HRA 50% of basic which comes to 15% of CTC, since we don't want to increase the Basic now considering it will impact the gratuity and leave encashment calculation, we are proposing to change the HRA from 15% to 20% of CTC. In this scenario the HRA is going beyond 50% of basic but basic +HRA becomes 50% of CTC. will this have any repercussion? Also, if there is any supporting or any law governing this, it will be helpful.

Thanks for asking Albus

There is no law mandating HRA to be 40% or 50%. These percentages are to calculate the tax exemption based on the city you submit a residing proof.

Hi. HRA is exemted based on your residence. If it's metro 50% , non metro 40% . There's no other calculation possibility

There are no specific legal ramifications for the proposed change, where the HRA would surpass 50% of the basic salary, as long as the total sum of the basic salary and HRA remains at 50% of the Cost to Company (CTC).

Hi @Nirzari Sen does it mean, we can keep HRA as per the company norms and the maximum hra exemption that any individual can get is based on the city that they stay in?

Yes @Harshala Dhotre

Thank you @Wristy @Aishwarya Pandey & @Nirzari Sen for your quick help. Appreciate much!!