The exemption in respect of HRA is based upon the following factors:
- Place of residence
- Rent paid
- HRA received.
Since there is a possibility of change in any of the above factors during the previous year, exemption for HRA should not always be calculated on annual basis. As long as there is no change in any of the above factors it can be calculated together for that period. Whenever there is a change in any of the above factors, it should be separately calculated till the next change.