Computation of Dearness allowance for rebate of HRA

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Krishna Wagle (Querist)
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13 August 2021 While calculation for exemption of House rent allowance in our office, there is confusion about addition of Dearness Allowance (DA) received by employee in total salary. Before, 7th CPC HRA is admissible based on Basic Pay plus DA but in 7th CPC, HRA is admissible only on Basic Pay. Some office has calculated exemption limit of HRA based on salary excluding dearness allowances received by employees but in some office Salary+DA is taken for computing exemption of HRA. In view of above, kindly enlighten whether both salary+DA is to be taken for computation of HRA exemption or only Salary is to be taken as HRA is admissible only on Basic Pay under 7th CPC for Central Government Employees.

CA.Pujah

CA.Pujah (Expert)
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14 October 2021 7th CPC is for payment of salary whereby as u pointed out,HRA is admissible only on Basic Pay.
but, there is no corresponding change in income tax act. so, for calculating tax exemption limit of HRA, 'Salary' includes basic salary as well as dearness allowance if the terms of employment so provide. It also includes commission based on a fixed percentage of turnover achieved by an employee as per terms of contract of employment but excludes all other allowances and perquisites.