How is HRA exemption calculated?

HRA exemption under Section 10(13A) is the minimum of: (1) Actual HRA received from employer; (2) 50% of Basic+DA for metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40% for non-metro; (3) Actual rent paid minus 10% of Basic+DA. All three conditions are computed annually and the lowest value is the exempt amount.

Can I claim HRA if I pay rent to my parents?

Yes, paying rent to parents and claiming HRA exemption is a legitimate tax planning strategy. You need a proper rent agreement, rent receipts, and the rent should be paid via bank transfer. Your parents must declare this as rental income in their Income Tax Return. This is especially beneficial if your parents are in a lower tax bracket.

Is HRA available in the new tax regime?

No. House Rent Allowance exemption under Section 10(13A) is not available under the New Tax Regime. If you switch to the new regime, you cannot claim HRA exemption regardless of the rent you pay. This is a significant factor to consider when comparing new vs old tax regime — especially if you pay high rent in a metro city.

What if landlord's PAN is not available for HRA claim?

If annual rent paid exceeds ₹1 lakh (₹8,333 per month), the landlord's PAN is mandatory to be submitted to your employer for HRA exemption. If the landlord does not have a PAN, you can submit a declaration from the landlord along with Form 60. Without proper documentation, your employer may not allow the full HRA exemption in TDS calculation.

HRA Calculator – House Rent Allowance Tax Exemption

City Type

Monthly CTC (optional — auto-derives Basic)₹1,00,000

Basic Salary (Monthly) ₹50,000

📌 Code of Wages 2019: Basic+DA must be ≥ 50% of CTC

HRA Received (Monthly)₹20,000

Actual Rent Paid (Monthly)₹18,000

DA (Monthly, if any)₹0

HRA Exemption (Annual)

₹0

Annual HRA received —

Tax saved (est.) —

Minimum of these 3 conditions:

① Actual HRA received ₹0

② 50%/40% of (Basic + DA) ₹0

③ Rent paid – 10% of Basic+DA ₹0

HRA Exemption (Annual) ₹0

Taxable HRA ₹0

💡 HRA exemption is the minimum of the 3 conditions. Rent receipts and landlord's PAN (if rent > ₹1L/yr) are required.

On this page

What is HRA
The 3-Condition Rule
Worked Example
How to Claim HRA
HRA While WFH
Important Rules
FAQ

What is HRA (House Rent Allowance)?

House Rent Allowance (HRA) is a component of salary paid by employers to employees to cover the cost of rented accommodation. Under Section 10(13A) of the Income Tax Act, salaried employees living in rented housing can claim HRA exemption — meaning a portion of the HRA received is deducted from taxable income, reducing their tax liability. HRA exemption is available only under the Old Tax Regime; it is not available if you opt for the New Tax Regime.

HRA Exemption: The 3-Condition Rule

The HRA exemption is the minimum of these three amounts (computed annually):

HRA Exemption = Minimum of: ① Actual HRA received from employer ② 50% of (Basic + DA) — Metro cities 40% of (Basic + DA) — Non-metro cities ③ Actual rent paid − 10% of (Basic + DA)

Metro cities: Delhi, Mumbai, Kolkata, Chennai
If you don't pay rent, exemption = ₹0 (Condition ③ = 0)

HRA Exemption Example

📘 Example: Delhi employee, Basic ₹50,000, HRA ₹20,000, Rent ₹18,000/month

① Annual HRA received	₹20,000 × 12 = ₹2,40,000
② 50% of Basic (Metro)	50% × ₹50,000 × 12 = ₹3,00,000
③ Rent − 10% of Basic	(₹18,000 − ₹5,000) × 12 = ₹1,56,000
HRA Exemption (Minimum)	₹1,56,000
Taxable HRA	₹2,40,000 − ₹1,56,000 = ₹84,000

Important HRA Rules

You must be actually paying rent to claim HRA exemption — staying rent-free negates the claim.
If annual rent exceeds ₹1 lakh, the landlord's PAN is mandatory to be provided to the employer.
You cannot claim HRA if you own a house in the same city where you work and reside (you may claim in different cities).
Self-employed individuals cannot claim HRA under Sec 10(13A) but can claim rent deduction under Sec 80GG (up to ₹60,000/year).
HRA is not available in the New Tax Regime — factor this in when choosing your regime.
Under Code of Wages 2019, Basic+DA must be ≥ 50% of CTC, which directly affects HRA calculation since HRA is typically 40–50% of Basic.

How to Claim HRA Exemption in ITR

Submit to employer for TDS: Provide rent receipts monthly or quarterly to HR/payroll. This reduces TDS deduction immediately.
Landlord PAN mandatory: If annual rent exceeds ₹1,00,000 (₹8,333/month), you must provide the landlord's PAN. Without it, the employer cannot give the full HRA benefit in TDS calculation.
In your ITR: Report in Schedule S under "Allowances exempt u/s 10". The exempt amount is deducted from gross salary before computing tax.
Missed employer submission? Claim directly in ITR filing — you'll receive a refund for excess TDS. No penalty for late claim through ITR.

HRA Exemption While Working From Home

Renting and WFH: Full HRA exemption is available. The Income Tax Act does not require your workplace to be separate from your home.
Paying rent to parents: Valid — even while WFH. Payment must be by bank transfer, and parents must declare rental income in their ITR. Can save ₹50,000–₹1,20,000/year in tax.
Living in own house: Cannot claim HRA exemption on any self-occupied property.
No HRA in salary: Claim under Section 80GG instead — up to ₹60,000/year for rent paid, subject to conditions.

Frequently Asked Questions

Yes, you can pay rent to your parents and claim HRA — but it must be genuine. You need a proper rent agreement, rent receipts, and the rent should be transferred via bank (not cash above ₹2,000). Your parents must declare this rental income in their ITR. This is a legitimate tax planning strategy, especially if your parents are in a lower tax bracket.

Yes, under specific circumstances — if your owned home is in a different city from where you work and rent. For example, if you own a flat in Pune but work and rent in Mumbai, you can claim both HRA (for Mumbai rent) and home loan deductions (for Pune EMI) simultaneously under the old tax regime.

If your salary structure doesn't include HRA, you can still claim rent deduction under Section 80GG if you are a salaried employee not receiving HRA. The deduction is the minimum of: (a) ₹5,000/month; (b) 25% of total income; (c) Actual rent − 10% of total income. Maximum benefit under 80GG is ₹60,000/year.

HRA exemption can be substantial — for someone in Mumbai with Basic ₹80,000 and rent ₹35,000, the annual HRA exemption can be ₹2.5–3L. Since New Regime offers no HRA, if you're paying significant rent, the Old Regime might still work out better. Use our Tax Calculator to compare: enter your income, HRA, and rent to see which regime saves you more tax.