House Rent Allowance (HRA) is partly exempt from tax under Section 10(13A), but the exempt amount isn’t just whatever HRA your employer pays. It’s the least of three figures. Get the formula right and you claim the maximum you’re entitled to.
The formula
Your HRA exemption is the lowest of these three:
- The actual HRA received from your employer.
- 50% of salary if you live in a metro (Delhi, Mumbai, Kolkata, Chennai), or 40% for non-metro cities.
- Actual rent paid minus 10% of salary.
Here “salary” means Basic pay + Dearness Allowance (plus any commission based on a fixed percentage of turnover). The lowest of the three is exempt; the rest of your HRA is taxable.
A worked example
Suppose, per year, you have:
- Basic + DA (salary): ₹6,00,000 (₹50,000/month)
- HRA received: ₹2,40,000 (₹20,000/month)
- Rent paid: ₹2,16,000 (₹18,000/month)
- City: Chennai (a metro → 50%)
The three figures work out to:
- Actual HRA received = ₹2,40,000
- 50% of salary = ₹3,00,000
- Rent paid − 10% of salary = ₹2,16,000 − ₹60,000 = ₹1,56,000
The least is ₹1,56,000, so that much of your HRA is exempt. The remaining ₹2,40,000 − ₹1,56,000 = ₹84,000 is added to your taxable income.
What you need to actually claim it
Keep rent receipts for the year, and your landlord’s PAN if annual rent exceeds ₹1,00,000. Generate compliant receipts free with the rent receipt generator or a whole year with the bulk generator. Note that the HRA exemption applies under the old tax regime; the new regime does not allow it, so compare both before filing.