• 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 + (Actual Basic in Compensation × Remaining Months in the Fiscal Year) + Total Basic Paid for Previous Months] × 10%)

    2. Actual HRA Received

      • (Actual HRA * Remaining months in the fiscal year) + Total HRA paid for previous Months + Calculated HRA

    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.