House Rent Allowance (HRA) is one of the most commonly claimed tax exemptions by salaried employees in India. If you live in a rented house and receive HRA as part of your salary, a significant portion of it can be exempt from income tax under Section 10(13A) of the Income Tax Act. However, the exemption is not automatic — it depends on several factors including your rent, salary structure, and city of residence.
This guide explains the HRA exemption rules for 2026 with step-by-step calculation methods, real-world examples, and answers to the most frequently asked questions.
What is HRA (House Rent Allowance)?
HRA is a component of your salary paid by your employer to help cover rental accommodation expenses. It is governed by Section 10(13A) of the Income Tax Act, 1961, read with Rule 2A of the Income Tax Rules.
Key points about HRA:
- HRA is part of your Cost to Company (CTC) and is paid monthly as part of your salary.
- The exemption is available only to salaried individuals who receive HRA as part of their salary and live in rented accommodation.
- Self-employed individuals cannot claim HRA under Section 10(13A) but can claim rent deduction under Section 80GG.
- The exemption is available under the old tax regime only. Under the new tax regime (Section 115BAC), HRA exemption is not available.
- You must actually be paying rent — simply receiving HRA does not entitle you to the exemption.
How HRA Exemption is Calculated
The HRA exemption is calculated as the minimum of three amounts. This is one of the most important rules to understand:
- Actual HRA received from your employer
- 50% of Basic Salary (for metro cities) or 40% of Basic Salary (for non-metro cities)
- Actual rent paid minus 10% of Basic Salary
The lowest of these three values is your HRA exemption. The remaining HRA (if any) is added to your taxable income.
For this calculation, "Basic Salary" includes Basic Pay + Dearness Allowance (DA) (only if DA forms part of retirement benefits). It does not include other allowances, bonuses, or commissions.
The Formula
A) Actual HRA received
B) 50% of Basic (metro) or 40% of Basic (non-metro)
C) Rent paid – 10% of Basic
Metro vs Non-Metro Cities
The percentage of Basic Salary used in calculation (condition B) depends on whether you live in a metro or non-metro city. This makes a significant difference in your exemption amount.
| Category | Cities | Percentage |
|---|---|---|
| Metro Cities | Delhi, Mumbai, Kolkata, Chennai | 50% of Basic Salary |
| Non-Metro Cities | All other cities (Bangalore, Hyderabad, Pune, Ahmedabad, Jaipur, etc.) | 40% of Basic Salary |
Note that the Income Tax Act specifically names only Delhi, Mumbai, Kolkata, and Chennai as metro cities for HRA purposes. Even though cities like Bangalore and Hyderabad are major IT hubs with high rents, they are classified as non-metro for HRA calculation. This means residents of Bangalore get only 40% of Basic as the upper limit, which can reduce their exemption.
HRA Calculation Examples
Let's walk through three realistic examples to understand how HRA exemption works in practice.
Example 1: Metro City (Mumbai)
| Parameter | Value |
|---|---|
| Basic Salary (monthly) | ₹50,000 |
| HRA Received (monthly) | ₹25,000 |
| Actual Rent Paid (monthly) | ₹20,000 |
| City | Mumbai (Metro) |
Calculation (monthly):
- A) Actual HRA received = ₹25,000
- B) 50% of Basic (metro) = 50% × ₹50,000 = ₹25,000
- C) Rent paid – 10% of Basic = ₹20,000 – ₹5,000 = ₹15,000
HRA Exemption = Minimum of (₹25,000, ₹25,000, ₹15,000) = ₹15,000/month
Taxable HRA = ₹25,000 – ₹15,000 = ₹10,000/month (₹1,20,000/year added to taxable income).
Example 2: Non-Metro City (Bangalore)
| Parameter | Value |
|---|---|
| Basic Salary (monthly) | ₹60,000 |
| HRA Received (monthly) | ₹30,000 |
| Actual Rent Paid (monthly) | ₹28,000 |
| City | Bangalore (Non-Metro) |
Calculation (monthly):
- A) Actual HRA received = ₹30,000
- B) 40% of Basic (non-metro) = 40% × ₹60,000 = ₹24,000
- C) Rent paid – 10% of Basic = ₹28,000 – ₹6,000 = ₹22,000
HRA Exemption = Minimum of (₹30,000, ₹24,000, ₹22,000) = ₹22,000/month
Taxable HRA = ₹30,000 – ₹22,000 = ₹8,000/month (₹96,000/year added to taxable income).
Example 3: Low Rent Scenario
| Parameter | Value |
|---|---|
| Basic Salary (monthly) | ₹40,000 |
| HRA Received (monthly) | ₹20,000 |
| Actual Rent Paid (monthly) | ₹8,000 |
| City | Pune (Non-Metro) |
Calculation (monthly):
- A) Actual HRA received = ₹20,000
- B) 40% of Basic (non-metro) = 40% × ₹40,000 = ₹16,000
- C) Rent paid – 10% of Basic = ₹8,000 – ₹4,000 = ₹4,000
HRA Exemption = Minimum of (₹20,000, ₹16,000, ₹4,000) = ₹4,000/month
Taxable HRA = ₹20,000 – ₹4,000 = ₹16,000/month. In this case, since rent is very low relative to salary, the exemption is severely limited by condition C. This person would benefit more from the Section 80GG deduction if they are eligible.
Documents Required for HRA Claim
To claim HRA exemption, you need to submit the following to your employer (usually during investment proof submission) and keep copies for your records:
- Rent receipts: Monthly rent receipts from your landlord for the entire financial year. Most employers require receipts for each month, though some accept quarterly receipts. The receipt should mention the landlord's name, your name, the address, the amount, and the period.
- Rent agreement: A copy of the registered rent agreement or lease agreement. If the agreement is not registered, a notarized copy may be accepted by most employers.
- Landlord's PAN: If annual rent exceeds ₹1,00,000 (₹8,333/month), you must provide your landlord's PAN. If the landlord does not have a PAN, they must provide a declaration along with their name and address.
- Declaration form: Many employers require a self-declaration form confirming that you are paying rent and living in the rented accommodation.
Can You Claim HRA and Home Loan Together?
Yes, it is legally possible to claim both HRA exemption and home loan deductions simultaneously, but there are specific conditions and the income tax department scrutinizes such claims carefully.
Scenarios where both are allowed:
- You own a house in City A (where you have a home loan) but work in City B and live in rented accommodation in City B. This is the most straightforward case.
- You own a house in the same city but live in a rented house in a different locality due to genuine reasons — such as the owned house being too far from your workplace, undergoing renovation, or being too small for your family.
What you can claim simultaneously:
- HRA exemption under Section 10(13A) for the rented accommodation
- Home loan interest deduction up to ₹2 lakh/year under Section 24(b) for the owned property (which is treated as deemed let-out or self-occupied)
- Home loan principal repayment up to ₹1.5 lakh/year under Section 80C
Caution: If both properties are in the same city and you claim HRA, be prepared to justify why you're living in a rented house instead of your own home. The assessing officer may ask for proof such as distance from workplace, renovation bills, or rental agreements. Fabricating a claim to get both benefits is tax evasion and can attract penalties.
HRA for Self-Employed (Section 80GG)
Self-employed individuals or salaried employees who do not receive HRA can claim a deduction for rent paid under Section 80GG of the Income Tax Act. This is available under the old tax regime only.
The deduction under Section 80GG is the minimum of:
- ₹5,000 per month (₹60,000 per year)
- 25% of total income (before this deduction)
- Actual rent paid minus 10% of total income
Conditions for Section 80GG:
- You must be self-employed or a salaried employee not receiving HRA.
- You must not own any residential property at the place of your employment or business.
- You must file a declaration in Form 10BA stating that you do not own a house at your place of work.
- If you own a house at a different location, you must not have claimed it as self-occupied (i.e., it must be treated as let-out, and rental income must be declared).
For example, if a self-employed person has a total income of ₹8 lakh and pays ₹15,000/month rent:
- A) ₹5,000/month = ₹60,000/year
- B) 25% of ₹8,00,000 = ₹2,00,000
- C) Rent paid (₹1,80,000) – 10% of ₹8,00,000 (₹80,000) = ₹1,00,000
Section 80GG Deduction = Minimum of (₹60,000, ₹2,00,000, ₹1,00,000) = ₹60,000/year
Calculate your HRA exemption instantly
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Calculate your HRA exemption with our free HRA Calculator →Frequently Asked Questions
Can I claim HRA if I live with my parents?
Yes, you can claim HRA exemption if you pay rent to your parents. You need a valid rent agreement, rent receipts, and your parent must declare the rental income in their ITR. The arrangement must be genuine — the income tax department can question the claim if the rent seems unreasonable or if you continue to claim HRA while living in a house owned by your parents without actually paying rent.
Can both husband and wife claim HRA for the same rented house?
Yes, if both are salaried, both receive HRA, and both are co-tenants on the rent agreement, both can claim HRA exemption proportionally based on their individual rent contributions. Each person must have rent receipts in their name for their share. The total rent claimed by both should not exceed the actual rent paid.
What happens if I forget to submit rent proofs to my employer?
If you miss the employer's deadline, the employer will deduct full tax without HRA exemption. However, you can still claim the HRA exemption while filing your Income Tax Return (ITR) and get a refund of the excess tax deducted. Keep all rent receipts and documents safely for this purpose.
Is HRA exemption available under the new tax regime?
No, HRA exemption under Section 10(13A) is not available if you opt for the new tax regime under Section 115BAC. If you have significant HRA and rent payments, calculate your tax under both regimes to determine which is more beneficial. Many salaried employees with high rent payments are better off with the old regime.
What is the minimum rent required to claim HRA?
There is no minimum rent amount specified in the law to claim HRA exemption. However, condition C (Rent paid – 10% of Basic) must be positive, meaning your rent must exceed 10% of your Basic Salary for any exemption to apply. If your rent is very low relative to your salary, the exemption under condition C will be minimal.