House Rent Allowance, or HRA, is a salary component meant to help cover the cost of rented accommodation. It is a standard line in most Indian salary structures, and its appeal is tax: if you actually pay rent, part of your HRA escapes tax under the HRA exemption in the old regime.

How it is usually sized

HRA is typically set at 40% to 50% of basic salary, with the higher end used for employees expected to live in metro cities. It is fully taxable if you do not pay rent, or if you own the home you live in, so the component only delivers value when there is genuine rent being paid.

The exemption in brief

The tax-free portion is the least of: actual HRA received, rent paid minus 10% of basic plus DA, and 50% of basic plus DA in a metro or 40% elsewhere. Whatever is left is taxable. If your annual rent exceeds Rs 1,00,000 you need the landlord’s PAN to claim it, and you declare the whole thing on Form 12BB.

Because the exemption depends on where you live and how much rent you pay, two people with the same HRA can get very different tax benefits from it. It is worth running the numbers before finalising a rent or a salary structure.

Frequently asked questions

Do I get HRA benefit under the new tax regime?

No. HRA exemption is an old-regime benefit. Under the new regime, HRA is fully taxable like any other allowance.

Can I claim HRA if I live with my parents?

Yes, if you genuinely pay them rent, they own the property, and they report it as income. Casual arrangements without money actually changing hands do not qualify.

What if my employer does not give me HRA?

You can claim a smaller deduction for rent under Section 80GG instead, subject to its own conditions and lower limits.

Size your exemption with the HRA Exemption Calculator, and see HRA inside the full structure with the Salary Breakup Calculator.