During investment declaration, employees provide their monthly rent amount and landlord PAN (mandatory if annual rent exceeds Rs 1 lakh). Zoho Payroll applies the least-of-three rule each month and includes only the taxable portion of HRA in the TDS computation. This ensures the correct TDS is deducted without requiring manual intervention from the payroll team.
The Income Tax Act treats cities differently for HRA exemption: employees in Delhi, Mumbai, Kolkata, and Chennai qualify for 50% of Basic as the third condition, while those in other cities (including Pune and Bengaluru) qualify for 40% of Basic. Zoho Payroll applies the correct rate based on the work location configured on the employee profile.
HRA appears in Form 16 Part B under ‘Allowances exempt under Section 10’. The taxable and exempt split is computed by Zoho Payroll across the financial year, including months where rent declarations changed. The final Form 16 generated by Zoho Payroll reflects the correct annual exempt amount.
HRA (House Rent Allowance) is an earning component in Zoho Payroll that compensates employees for rental accommodation expenses. Zoho Payroll automatically computes the tax-exempt portion each month using the least-of-three rule under Section 10(13A) and adjusts TDS accordingly.
Yes. Once the employee submits their rent declaration through the Zoho Payroll employee self-service portal, the system calculates the exempt and taxable portions of HRA each month and incorporates the result into the TDS calculation without any manual input.
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