HRA (House Rent Allowance)
House Rent Allowance (HRA) is a salary component paid by employers to help employees meet the cost of rented accommodation. It is one of the most common tax-saving components available to salaried employees under the old tax regime, exempt under Section 10(13A) read with Rule 2A of the Income Tax Rules.
The HRA exemption is the least of three amounts: actual HRA received, rent paid minus 10% of (Basic + DA), or 50% of (Basic + DA) for metro cities (Mumbai, Delhi, Kolkata, Chennai) or 40% for non-metro cities. HRA exemption is available only under the old tax regime; the new tax regime does not allow this exemption.
Key points
- ✓ Exempt under Section 10(13A) only in the old tax regime, not the new regime
- ✓ Exemption = least of: actual HRA, rent paid minus 10% of Basic+DA, or 50%/40% of Basic+DA
- ✓ 50% applies for metro cities (Delhi, Mumbai, Kolkata, Chennai); 40% for others
- ✓ Rent receipts and landlord PAN (if annual rent exceeds ₹1 lakh) are required as proof
- ✓ Fully taxable if the employee lives in employer-provided or self-owned accommodation
Example
An employee in Mumbai with a basic salary of ₹30,000/month, HRA of ₹15,000/month, and actual rent paid of ₹18,000/month gets exemption equal to the least of: ₹15,000 (actual HRA), ₹15,000 (rent minus 10% of basic), or ₹15,000 (50% of basic) — so the full ₹15,000 HRA is tax-exempt in this case.
Frequently asked questions
Can I claim HRA exemption under the new tax regime?
Can I claim HRA if I live in my own house?
Do I need landlord's PAN for claiming HRA?
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