CALCULATION OF HRA
HRA is a part of salary package , in accordance with the term & condition of employment. Employee generally received HRA from his Employer. HRA is given to meet the cost of a rented house taken by the employee. HRA is an allowance for employee.

An employee can claim exemption on his HRA under the Income Tax Act if he stays in rented house and is in receipt of HRA from his Employer. The rented premises must not be owned by him. In case one house of him, HRA not deductable, and the whole amount of HRA is Taxable.
There are three type of categories to calculate of Exempt HRA:
1- House Rent allowance received from Employer.
2- Actual Rent paid by Employee minus 10% of Basic Salary.
3- 50% of Basic if you live in metro city and 40% of Basic if you lives in non metro city.

The Minimum amount of above categories is exempt from Tax.

Example:

Mr. X received following amount in F.Y. 2012-2013
Basic Salary --- Rs (10000 * 12) = Rs 120000/- p.a.
Dearness Allowance --- Rs (4000 * 12) = Rs 48000/- p.a.

HRA Received ---- Rs (6000 * 12) = Rs 72000/- p.a.
HRA Paid --- Rs (5000 * 12) = Rs 60000/- p.a.
Calculation:

1- HRA Received from Employer = Rs 72000/- p.a.
2- Rent Paid 10% of Basic (Rs 60000 16800) = Rs 43200/- p.a.
3- 40% of Basic in Dehradun = 67200/- p.a.
Therefore Rs 43200/- is exempt from Tax and Rs 28800/- (72000 43200) is Taxable in Salary.