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HRA exemption calculator — Section 10(13A)
HRA (House Rent Allowance) is a salary component that salaried employees can exclude from their taxable income under Section 10(13A) of the Income Tax Act — provided they actually pay rent and maintain valid rent receipts. The exempt amount is calculated as the minimum of three formulas.
The three-part HRA formula
The HRA exemption is the least of:
- Actual HRA received from the employer during the year.
- 50% of basic salary + DA for metro cities (Delhi, Mumbai, Chennai, Kolkata); 40% for other cities.
- Rent paid minus 10% of basic salary + DA.
Worked example
(a) Actual HRA received = ₹3,00,000/yr.
(b) 40% of basic = 0.40 × ₹7,20,000 = ₹2,88,000/yr.
(c) Rent minus 10% basic = ₹2,64,000 − ₹72,000 = ₹1,92,000/yr.
HRA exemption = ₹1,92,000 (least of the three).
Remaining ₹1,08,000 of HRA is taxed as part of Ravi\'s salary.
Documents required
- Monthly rent receipts — signed by landlord with revenue stamp if rent is over ₹5,000/mo.
- A rent agreement — though technically not required by statute, most employers insist on one for amounts over ₹1,00,000/yr.
- Landlord\'s PAN — mandatory if annual rent exceeds ₹1,00,000 (approx ₹8,333/mo).
- Proof of payment — bank transfer records or UPI receipts (cash payments may be scrutinised).
Can\'t claim HRA? Use Section 80GG
Self-employed individuals and salaried employees who don\'t receive HRA can claim a similar deduction under Section 80GG — the least of: (a) ₹5,000/mo, (b) 25% of adjusted total income, or (c) rent paid minus 10% of adjusted total income.
FAQs
What is HRA exemption?
HRA (House Rent Allowance) exemption is a tax benefit under Section 10(13A) of the Income Tax Act that allows salaried employees to exclude part of their HRA from taxable income, provided they actually pay rent and produce valid rent receipts. Self-employed individuals can claim a similar benefit under Section 80GG.
How is HRA exemption calculated?
HRA exemption is the minimum of: (1) actual HRA received from employer, (2) 50% of basic salary (metro cities) or 40% (non-metro), (3) actual rent paid minus 10% of basic salary. The lowest of these three amounts is exempt from tax.
Which cities are considered "metro" for HRA?
For HRA purposes, the four metro cities are Delhi, Mumbai, Chennai and Kolkata. Bengaluru, Hyderabad, Pune and others are classified as non-metro, where the 40% cap applies.
Can I claim HRA if I pay rent to my parents?
Yes, provided the arrangement is genuine — rent is actually paid, parents declare it as income in their tax returns, and you have rent receipts. The arrangement is scrutinised by tax authorities, so documentation is essential.
Related: Rent receipt format for HRA · TDS on rent