HRA (House Rent Allowance) is a salary component paid to employees living in rented accommodation, which is partially or fully exempt from income tax under Section 10(13A) (only in the old tax regime).

HRA (House Rent Allowance)

HRA (House Rent Allowance) is a salary component paid to employees living in rented accommodation, which is partially or fully exempt from income tax under Section 10(13A) (only in the old tax regime).

What is HRA (House Rent Allowance)?

HRA exemption is the lowest of these three: (a) actual HRA received, (b) 50% of basic + DA for metro cities (40% for non-metro), or (c) actual rent paid minus 10% of basic + DA. The exemption is available only under the old tax regime. Under the new regime, HRA is fully taxable.

Formula: HRA Exemption = MIN( Actual HRA received, 50% × (Basic + DA) [40% for non-metro], Actual rent paid − 10% × (Basic + DA) )

Example

Employee in Mumbai with Basic ₹50,000, HRA ₹25,000, rent paid ₹30,000: (a) HRA received = ₹25,000 (b) 50% × 50,000 = ₹25,000 (c) 30,000 − 5,000 = ₹25,000 Exempt = ₹25,000 (lowest of the three).

How HRA (House Rent Allowance) is used

HRA exemption is claimed via Form 12BB by submitting rent receipts (and PAN of landlord if rent crosses ₹1 lakh/year). Payroll uses these declarations to compute monthly TDS.

HRA (House Rent Allowance) FAQs

Can I claim HRA under the new tax regime?

No. HRA exemption is available only under the old tax regime.

What documents are needed for HRA?

Rent receipts and a rent agreement. Landlord PAN is required if annual rent exceeds ₹1 lakh.

Can I claim HRA if I live with parents?

Yes, if you actually pay rent to them and have proper receipts. The parents must declare it as rental income.