In SumoPayroll, when an employee has declared House Rent, the HRA exemption is calculated each month during TDS (Tax Deducted at Source) processing, based on applicable income tax rules.


HRA Exemption Formula

The exempted HRA amount is calculated as the least of the following:

  1. Actual Rent Paid – 10% of Salary

    • House Rent – ([Calculated Basic + Total Basic Paid for Previous Months] * 10%)

  2. Actual HRA Received

    • Current Month HRA + Total HRA Paid for Previous Months


Note:

  • The lowest of the above two values will be exempted from taxable income under Section 10(13A) of the Income Tax Act.

  • This ensures the employee gets the eligible tax benefit each month based on declared rent and salary structure.