Employee Tax Exemption Declaration

At the beginning of a Payroll Period, employees can declare the amount of exemption from their taxable salary they will be claiming at the end of the period by submitting proofs. To create a new Employee Tax Exemption Declaration, go to

Human resources > Payroll > Employee Tax Exemption Declaration > New Employee Tax Exemption Declaration

Employee Tax Exemption Declaration

The Total Exemption Amount will be exempted from annual taxable earnings of the employee while calculating the tax deductions in Payroll.

Note: Employees can only submit one Employee Tax Exemption Declaration for a Payroll Period.

Regional - India

For the current fiscal year, in India, House Rent Allowance (HRA) exemption from taxable earnings is the minimum of:

  • The actual amount allotted by the employer as the HRA.
  • Actual rent paid less 10% of the basic salary.
  • 50% of the basic salary, if the employee is staying in a metro city (40% for a non-metro city).

As part of the Employee Tax Exemption Declaration, employees shall also fill out the HRA Exemption. ERPNext will calculate the exemption eligible for HRA and exempt it while calculating the taxable earnings.

Note: HRA component shall be configured in Company for HRA exemption to work

Next: Employee Tax Exemption Proof Submission