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What is HRA and who gets it?
HRA (House Rent Allowance) is a component of your salary that your employer pays specifically to help with your housing costs. Most private sector employees in India receive HRA as part of their CTC structure — typically 40–50% of their basic salary.
While the HRA you receive is technically part of your taxable salary, the Income Tax Act allows you to claim an exemption on part or all of it under Section 10(13A) — provided you actually pay rent for accommodation you live in.
Want to know your exact salary after HRA and all deductions? Use our free Payslip Calculator →
HRA Exemption Formula — Section 10(13A)
The exempt portion of HRA is the minimum (lowest) of the following three values:
The annual HRA component as shown in your CTC / payslip
Actual annual rent you paid, minus 10% of your annual basic
Delhi, Mumbai, Chennai, Kolkata = 50%. All other cities = 40%.
The portion of HRA that is not exempt (i.e., HRA received minus the exempt amount) is added to your taxable income for the year.
Step-by-Step Calculation Example
Let's take a real example to make this crystal clear:
- Annual Basic Salary: ₹6,00,000 (₹50,000/month)
- Annual HRA from employer: ₹2,40,000 (₹20,000/month)
- Monthly Rent Paid: ₹18,000
- City: Bengaluru (Metro from FY 2026-27 — 50% of Basic applies)
| Condition | Calculation | Amount |
|---|---|---|
| 1. Actual HRA received | ₹20,000 × 12 | ₹2,40,000 |
| 2. Rent − 10% of Basic | (₹18,000 × 12) − (₹6,00,000 × 10%) | ₹1,56,000 |
| 3. 50% of Basic (Metro) | ₹6,00,000 × 50% | ₹3,00,000 |
| HRA Exemption (Minimum of above) | ₹1,56,000 | |
Priya's HRA exemption = ₹1,56,000 (limited by Condition 2). The remaining ₹84,000 (₹2,40,000 − ₹1,56,000) is taxable. At 20% slab, her exemption saves her ₹31,200 in annual tax.
Note: If she pays higher rent (above ₹20,000/mo), Conditions 1 or 3 could increase her exemption — Bengaluru's metro upgrade helps employees paying high rents close to or above 50% of basic.
Metro vs Non-Metro Cities
From FY 2026-27, the following eight metro cities qualify for 50% of Basic Salary as HRA exemption:
50% of Basic
50% of Basic
50% of Basic
50% of Basic
50% of Basic
50% of Basic
50% of Basic
50% of Basic
All other cities — including Gurgaon, Noida, Chandigarh, Surat, Jaipur, Lucknow, Indore — remain non-metro at 40% of Basic Salary.
Can I pay rent to my parents and claim HRA?
Yes — this is completely legal and widely practiced. However, the IT Department scrutinises family rent arrangements carefully. You must follow all these conditions:
- The house must be legally owned by your parent (not co-owned with you)
- Rent must be paid via bank transfer (NEFT, UPI, cheque) — cash payments are not accepted as evidence
- A valid registered rent agreement must exist
- Your parent must declare the rent as income in their ITR (under house property)
- If annual rent exceeds ₹1L, your parent's PAN must be provided to your employer
You cannot pay rent to your spouse and claim HRA. The IT Department does not allow this arrangement, as there is no genuine arm's-length transaction between spouses.
What if I own my house?
If you live in a house you own, you are not entitled to any HRA exemption — the entire HRA received is added to your taxable salary. This is regardless of whether you have a home loan on the property.
However, if you own a house in City A but work and rent in City B, you may still claim HRA exemption for the rent you pay in City B. For example, if you own a flat in Pune but work in Mumbai and rent there, you can claim HRA for the Mumbai rent.
HRA in New vs Old Tax Regime
Full HRA exemption under Section 10(13A) applies. This is one of the biggest reasons some salaried employees still benefit from the Old Regime.
Under New Regime, no HRA exemption is available. The entire HRA received is taxable. This is a key trade-off when choosing between regimes.
This means if you pay significant rent, the Old Regime may still be better for you despite its higher slab rates. Use our New vs Old Regime Calculator to check.
How to Maximise Your HRA Exemption
- Negotiate higher HRA in CTC: Ask HR to structure more of your salary as HRA (up to 50% of basic). Many employers allow restructuring once a year.
- Pay rent above 10% of basic: Condition 2 (rent − 10% of basic) is often limiting. Ensure your monthly rent is meaningfully above ₹[Basic × 10%].
- Keep strict documentation: Rent receipts for every month, bank statements showing transfers, rent agreement.
- Submit declaration to employer by April: Submit your rent proof early so your employer can adjust TDS throughout the year — not just at year end.
- PAN requirement: If annual rent exceeds ₹1,00,000, provide your landlord's PAN to your employer. If landlord doesn't have PAN, get a declaration from them.
Common HRA Mistakes That Cost Indians Money
- Paying rent in cash: Cash rent payments are not accepted as valid proof. Always pay via bank transfer, UPI, or cheque.
- Not submitting proof to employer: If you don't submit rent receipts, your employer deducts TDS assuming no HRA exemption. You can still claim it when filing ITR — but you delay your refund by months.
- Choosing New Regime without checking: High-rent payers often benefit more from Old Regime due to HRA exemption. Always calculate both before deciding.
- Claiming HRA without paying rent: This is fraud. IT Dept conducts cross-verification. Landlord's ITR must show rental income. Penalties are severe.
- City classification check: From FY 2026-27, Bengaluru, Pune, Hyderabad, and Ahmedabad are now metro cities (50% of basic). If you previously claimed 40%, update your submissions with HR to get the higher exemption.
- Not updating employer when rent changes: If you move to a cheaper or costlier flat mid-year, inform HR and resubmit rent receipts to get accurate TDS adjustment.
Calculate Your HRA Exemption
Use our calculator below to instantly find your exact HRA exemption amount:
| Condition | Amount |
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