Understand HRA Tax Exemption on Rent
Learn how House Rent Allowance exemption works under Section 10(13A), who can claim it, how the exemption is calculated and how the old and new tax regimes affect HRA benefits.
Know your eligible exemption.
Your HRA benefit depends on actual HRA, eligible salary, rent paid and the location of the rented property.
What is HRA tax exemption?
House Rent Allowance, commonly called HRA, is an allowance provided by many employers to salaried employees to help meet the cost of rented accommodation.
Under Section 10(13A) read with Rule 2A, an eligible salaried employee can claim exemption for the qualifying portion of HRA when they actually occupy rented residential accommodation and pay rent.
The exemption is calculated using three limits and the lowest amount is treated as exempt. HRA exemption is available under the old tax regime and is not available under the new tax regime.
How HRA exemption is calculated
The exempt amount is the least of the three prescribed calculations. Understanding each one makes your HRA calculation much easier.
Actual HRA Received
The first limit is the actual House Rent Allowance received by the employee from the employer during the relevant period.
Rent Minus 10%
Calculate the rent actually paid and subtract 10% of the applicable salary. The balance becomes the second limit.
Salary Percentage
The third limit is 50% of salary for specified metro cities and 40% of salary for other locations.
Estimate your HRA tax exemption
Enter your annual salary considered for HRA, annual HRA received and annual rent paid. This calculator uses the standard three-limit method for an illustrative old-regime HRA exemption calculation.
Actual HRA
Rent − 10%
Salary percentage
Who can claim HRA exemption?
HRA exemption is subject to specific conditions. Simply receiving HRA in your salary does not automatically make the entire amount exempt.
Salaried Employee
HRA exemption under Section 10(13A) is relevant to salaried employees who receive HRA from their employer.
Rented Accommodation
You must occupy residential accommodation on rent and actually pay rent for the accommodation.
Old Tax Regime
HRA exemption under Section 10(13A) is available when the old tax regime is opted for, subject to the applicable conditions.
Actual Rent Payment
The exemption is linked to actual rent expenditure. Living in your own house or not paying rent does not qualify for HRA exemption.
40% vs 50% HRA salary limit
The salary-percentage component of the HRA formula differs depending on whether the rented accommodation is in a specified metro city or another location.
50% of salary
For accommodation situated in Mumbai, Kolkata, Delhi or Chennai, the prescribed salary percentage used in the HRA exemption calculation is 50%.
40% of salary
For accommodation situated at places other than the specified metro cities, the prescribed salary percentage is 40%.
Keep your rent records ready
Maintain appropriate rent and salary records so that your HRA claim can be supported if required.
Common HRA exemption mistakes
Avoid these common errors when calculating or reporting your HRA exemption.
Claiming full HRA automatically
The complete HRA received is not automatically exempt. The exemption is the least of the three prescribed limits.
Ignoring the city category
The salary percentage is 50% for specified metro cities and 40% for other locations.
Claiming without paying rent
HRA exemption requires actual rent expenditure for eligible rented residential accommodation.
Using the new regime for HRA
HRA exemption under Section 10(13A) is not available under the new tax regime.
Ignoring landlord PAN requirements
When applicable, employees should provide the landlord's PAN to the employer when rent exceeds the prescribed threshold.
Confusing HRA with Section 80GG
HRA exemption and the deduction under Section 80GG are separate provisions with different eligibility requirements.
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HRA exemption, simplified.
Find answers about eligibility, calculation, rent receipts, metro-city limits and tax-regime treatment.
HRA Tax Exemption FAQs
HRA tax exemption is the exemption available under Section 10(13A) for the eligible portion of House Rent Allowance received by a salaried employee who pays rent for qualifying residential accommodation.
The exemption is the least of actual HRA received, rent paid minus 10% of salary, and 50% of salary for specified metro cities or 40% of salary for other locations.
No. HRA exemption under Section 10(13A) is available under the old tax regime and is not available under the new tax regime.
No. HRA exemption is linked to actual rent expenditure. If an employee lives in their own house and does not pay rent, HRA is taxable.
For accommodation situated in Mumbai, Kolkata, Delhi or Chennai, 50% of salary is used as one of the three limits in the HRA exemption calculation.
For accommodation situated outside the specified metro cities, 40% of salary is used as one of the three limits in the HRA calculation.
The Income Tax Department states that the landlord's PAN is required to be reported to the employer when rent paid exceeds ₹1,00,000, subject to the applicable requirements.
Actual rent payment is a prerequisite for HRA exemption. Appropriate evidence of rent payment should therefore be maintained. Employers may request supporting documents according to their procedures.
HRA exemption under Section 10(13A) applies to eligible salaried employees receiving HRA. Section 80GG is a separate deduction with its own eligibility conditions and calculation rules.
Make your HRA claim easier to understand.
Check your rent, salary, HRA and tax regime before reporting the exemption in your income-tax return.
FinancePilot provides general educational information and does not provide individual tax, legal, accounting, investment or financial advice. Tax rules and filing requirements may change. Verify the provisions applicable to your assessment year with the Income Tax Department or a qualified tax professional before filing your return.