House Rent Allowance (HRA) is a common salary component in India that helps employees cover rental costs — and a portion can be exempt from income tax under Section 10(13A) of the Income Tax Act. The exemption is not automatic; it depends on your basic salary, actual rent paid, city of residence, and tax regime. Use our free HRA Calculator to see exempt vs taxable HRA, and read our Complete Salary & Tax Guide for Indian Employees for the full picture.
The HRA Exemption Formula
HRA exemption is the minimum of these three amounts:
- Actual HRA received from your employer
- Actual rent paid minus 10% of basic salary
- 50% of basic salary if you live in a metro city (Delhi, Mumbai, Chennai, Kolkata) or 40% of basic salary if you live in a non-metro city
Only the lowest of the three figures qualifies as exempt. The rest of your HRA is taxable. The HRA Calculator runs all three conditions side by side so you can see which rule limits your exemption.
Worked Example — Bengaluru (Non-Metro)
Suppose your basic salary is ₹50,000/month, HRA received is ₹20,000/month, and rent paid is ₹18,000/month in Bengaluru (non-metro):
- (1) Actual HRA received = ₹20,000
- (2) Rent paid − 10% of basic = ₹18,000 − ₹5,000 = ₹13,000
- (3) 40% of basic (non-metro) = ₹20,000
Minimum = ₹13,000/month exempt. The remaining ₹7,000 of HRA is taxable each month.
Old Tax Regime Only
HRA exemption is available only under the old tax regime. From FY2024-25, the new tax regime is the default for salaried employees — you cannot claim HRA there. You must explicitly opt into the old regime with your employer (typically via Form 12BB at the start of the financial year) to claim HRA. Compare regimes in our old vs new tax regime guide.
Documents You Need
Keep monthly rent receipts for the full year. If annual rent exceeds ₹1 lakh, your landlord's PAN is mandatory. A rent agreement strengthens your claim during employer verification or IT scrutiny. For generating compliant receipts, see our rent receipt for HRA exemption guide. Submit declarations through your employer's Form 12BB process.
Frequently Asked Questions
How is HRA exemption calculated?
HRA exemption equals the minimum of three values: actual HRA received, actual rent paid minus 10% of basic salary, and 50% of basic salary for metro cities or 40% for non-metro cities. Only the minimum of these three is exempt.
Which cities are considered metro for HRA purposes?
Only four cities are classified as metro for HRA tax purposes: Delhi, Mumbai, Chennai, and Kolkata. All other cities — including Bengaluru, Hyderabad, Pune, Ahmedabad, and others — are treated as non-metro, where the cap is 40% of basic salary instead of 50%.
Can I claim HRA exemption under the new tax regime?
No — HRA exemption is only available under the old tax regime. Under the new tax regime (which is the default from FY2024-25), HRA and most other deductions cannot be claimed. You must explicitly opt for the old regime with your employer to claim HRA.
Do I need rent receipts to claim HRA?
Yes — rent receipts are required as proof. If your annual rent exceeds ₹1 lakh (₹8,333/month), you must also provide your landlord's PAN to your employer. Without PAN, the employer must deduct TDS on the full HRA, eliminating most of the tax benefit.
Related Reading
- How to Generate Rent Receipt for HRA Exemption
- Complete Salary & Tax Guide for Indian Employees
- How to Calculate In-Hand Salary from CTC