House Rent Allowance (HRA) is best tax saving tools available to employees. With these you can save upto 50% of your salary if you reside in Metro (40% of your salary if you reside in non-metro).
As per income Tax act, for calculation House rent allowance least of the following is available as deduction :
- Actual HRA received
- 50% / 40%(metro / non-metro) of basic ‘salary’
- Rent paid minus 10% of ‘salary’. Basic Salary for this purpose is basic+ DA forming part+ commission on sale on fixed rate.
Cities Like, Delhi, Mumbai, Chennai and Kolkata constitutes Metro. All cities other than these are non-Metro. So if you resides in cites like Gurgaon, Faridabad, Bangalore, Hyderabad, Pune, Indore, Chandigarh, Ludhiana, Manessar, Kerala, Goa, Panzim , Diu etc it would constitutes as Non metro and only 40% deduction will be allowed.