Find out how much of your House Rent Allowance is tax-exempt under Section 10(13A) — based on your Basic salary, HRA received, rent paid, and whether you live in a metro city.
| Rule (Section 10(13A)) | Annual Amount |
|---|---|
| Actual HRA received | ₹0 |
| Rent paid − 10% of Basic | ₹0 |
| 50%/40% of Basic (metro/non-metro) | ₹0 |
Section 10(13A) of the Income Tax Act doesn't let you exempt your entire HRA — it caps the exemption at the lowest of three separately calculated amounts. This design prevents someone with a small actual rent from claiming a large exemption just because their employer labels a big chunk of salary as "HRA."
You can never exempt more than the HRA your employer actually pays you, no matter how high your rent is.
Only the rent you pay above 10% of your Basic salary counts toward exemption — the first 10% is treated as an amount you'd spend on housing regardless of employment.
The government caps HRA exemption at half your Basic salary if you live in Delhi, Mumbai, Kolkata, or Chennai, and at 40% for every other city — even if your actual rent and HRA are both higher.
Your final tax-exempt HRA is the minimum of these three figures. Any HRA you receive above that minimum gets added to your taxable salary. This is why simply having a high HRA component doesn't guarantee a high exemption — your actual rent and Basic salary matter just as much.
Seeing the three-rule formula applied to real numbers makes it easier to understand why the lowest value — not the highest — determines your exemption.
Suppose your monthly Basic salary is ₹30,000, you receive ₹15,000 monthly HRA, pay ₹18,000 monthly rent, and live in Mumbai (metro). Annually: actual HRA received is ₹1,80,000; rent minus 10% of Basic is (₹2,16,000 − ₹36,000) = ₹1,80,000; and 50% of Basic is ₹1,80,000. All three happen to align closely here, so the exemption is close to the full HRA received — a scenario where your salary structure and actual rent are well matched.
Now suppose Basic is ₹25,000/month, HRA received is ₹12,500/month, rent paid is only ₹8,000/month, and you live in a non-metro city like Pune. Annually: actual HRA is ₹1,50,000; rent minus 10% of Basic is (₹96,000 − ₹30,000) = ₹66,000; and 40% of Basic is ₹1,20,000. Here, the smallest of the three is the rent-based calculation at ₹66,000 — meaning only ₹66,000 of the ₹1,50,000 HRA received is tax-exempt, and the remaining ₹84,000 gets added to your taxable salary. This illustrates why a low rent relative to your Basic salary often becomes the limiting factor, even in a city with a higher 50%/40% cap.
Claiming HRA exemption isn't automatic — your employer typically asks for supporting documents before processing it through your monthly TDS calculation, and you may need the same documents again if you file your return independently or face a query from the tax department.
Monthly or periodic rent receipts signed by your landlord, showing the rent amount, period, and property address, are the most basic requirement. Many employers accept a consolidated set covering the full financial year rather than twelve separate monthly receipts.
If your annual rent exceeds ₹1,00,000 (about ₹8,333/month), you're required to provide your landlord's PAN details to your employer. If the landlord doesn't have a PAN, a declaration to that effect is generally accepted instead, though requirements can vary by employer.
A signed rental agreement, while not always mandatory for salaried employees claiming standard HRA exemption, strengthens your claim considerably and is often requested if the case is picked up for scrutiny or if you're claiming a large exemption amount.
Paying rent through bank transfer rather than cash creates a clear paper trail that supports your claim, particularly important when renting from family members where the arrangement might otherwise appear informal or undocumented.
Since HRA exemption only exists under the old tax regime, anyone paying substantial rent should compare their total tax liability under both regimes before deciding — the new regime's lower slabs and bigger standard deduction don't automatically make it the better choice once a meaningful HRA exemption is factored in.
If your HRA exemption plus other deductions (80C investments, 80D health insurance, home loan interest) add up to a large figure relative to your income, the old regime's higher slab rates are often outweighed by the size of your total deductions, especially for those paying high rent in a metro city.
If you don't pay rent, live in employer-provided or self-owned accommodation, or have few other deductions to claim, the new regime's simpler structure and higher tax-free threshold usually results in lower overall tax.
Use this calculator to find your HRA exemption, then feed your total deductions into the Income Tax Calculator under both regimes, or use the In-Hand Salary Calculator, which compares New vs Old regime take-home side by side, to see which one leaves you with a higher monthly take-home salary.
It lets salaried employees who pay rent claim a portion of their House Rent Allowance as tax-exempt, calculated as the lowest of actual HRA, rent paid minus 10% of Basic, and 50%/40% of Basic salary.
Only Delhi, Mumbai, Kolkata and Chennai count as metro cities for this purpose, qualifying for the 50% of Basic limit. All other cities use the 40% non-metro limit.
No. HRA exemption is only available under the old tax regime — the new regime doesn't allow this or most other deductions, in exchange for lower slab rates.
Yes, provided you actually pay rent and can show proof such as bank transfers and a rent agreement, and your parents declare it as rental income in their own return.
Yes, in specific situations — for example, if you own a house in one city but rent accommodation in another city for work, or if your owned property isn't ready for occupation yet, you may be able to claim both simultaneously under the old regime.
If you don't submit proof during the financial year, your employer will deduct higher TDS without factoring in the HRA exemption. You can still claim the exemption later when filing your own income tax return, provided you have the supporting documents.
HRA exemption under Section 10(13A) applies specifically to salaried employees receiving HRA as part of their salary structure. Self-employed individuals and freelancers who pay rent instead claim a related but separate benefit under Section 80GG, which has its own formula and a lower overall cap, since they don't receive a formal HRA component.
If you rent accommodation in the city where you work while your family lives elsewhere in a house you own, you can generally still claim HRA exemption for the rented accommodation, since the exemption is tied to where you actually reside for work, not where your family or owned property is located.
If you changed rental accommodation during the financial year — for instance, relocating for a new job or a lease ending — the exemption should be calculated separately for each period based on the rent and city applicable at that time, then summed for the full year rather than averaged.
If you received HRA for a period during which you weren't actually paying rent (for example, staying with family before your lease began), that portion of HRA is fully taxable, and exemption should only be calculated for the months you genuinely paid rent.