Glossary
House Rent Allowance (HRA)
A CTC component compensating for rented accommodation, excluded from the statutory wages definition, and partially tax-exempt under the Income-tax Act 2025 based on city and rent paid.
HRA is one of the components explicitly excluded from wages under Code on Wages §2(y). So it does not directly count toward gratuity or PF calculations. But it still counts toward the 50%-exclusions ceiling that triggers deemed wages if breached.
Its tax exemption formula (linked to metro vs non-metro rates, rent paid, and basic pay) carries forward from the old regime into the Income-tax Act 2025. The metro-rate expansion detail in the final Income-tax Rules 2026 is still an open item.
Why it matters now: HRA remains a useful lever for take-home optimisation. But CTC designers must track it against the 50%-exclusions ceiling, not treat it as free of statutory consequence.