HRA exemption is one of the largest tax breaks available to salaried employees under the old regime, but it isn’t simply “whatever HRA you receive.” It’s the lowest of three separate numbers, and most people only ever check one of them.

The three-way comparison

Under Section 10(13A), your exempt HRA is the least of: the HRA you actually receive, your rent paid minus 10% of Basic+DA, or 50% of Basic+DA if you live in a metro (Delhi, Mumbai, Kolkata, Chennai) or 40% elsewhere. Whichever of these three is smallest is what you get to exclude from taxable income, the rest of your HRA is taxed as regular salary.

This only matters if you choose the old tax regime for the year. The new regime doesn’t recognise HRA exemption at all, so if you’ve moved to the new regime, this calculation is not applicable to you.

Frequently asked questions

Can I claim HRA exemption if I live with my parents and pay them rent?

Yes, provided the arrangement is genuine, rent is actually paid (ideally via bank transfer) and your parents declare it as rental income. It’s commonly done but should be able to withstand scrutiny.

What documents do I need?

Rent receipts for the claimed period, and your landlord’s PAN if annual rent exceeds ₹1,00,000, most employers ask for this before processing the exemption in payroll.

I own a house but live in a rented one in another city for work. Can I still claim HRA?

Generally yes, and you may also be able to claim home loan interest deduction on the owned property separately, this is a common dual-city scenario. Confirm the specifics with a tax advisor since it depends on your full return.

How does this fit into my overall take-home calculation?

HRA exemption is one input into your total tax liability. Use our Take-Home Salary Calculator to see the full old-vs-new regime picture, or our Income Tax Calculator for a standalone tax computation.

What other old-regime exemptions should I be checking?

LTA is the other major one most salaried employees leave money on the table with, our LTA Exemption Calculator works through that separately. Both need to be weighed against what the new regime’s lower slabs would give you instead.

Does HRA exemption change how my CTC is structured?

It can, some companies let you adjust the HRA component of your CTC within limits since a higher HRA (up to a point) means more of it can potentially be exempt. See our CTC to In-Hand Salary Calculator to see how the components interact.