HRA exemption is the part of your House Rent Allowance that is not taxed, because you actually pay rent. It is granted under Section 10(13A) and is one of the largest tax breaks available to a salaried person who rents. It applies only in the old tax regime.

The least-of-three rule

Your exempt HRA is the lowest of these three amounts:

• The actual HRA received in the year
• Rent paid, minus 10% of salary
• 50% of salary if you live in a metro (Delhi, Mumbai, Kolkata, Chennai), or 40% if you do not

Here “salary” means basic plus DA, plus commission if it is a fixed percentage of turnover. Everything is computed for the period the conditions hold, month by month if your rent or salary changed.

A worked example

Basic Rs 50,000 a month, HRA Rs 20,000 a month, rent Rs 18,000 a month, living in Mumbai. Annual figures: HRA received Rs 2,40,000; rent Rs 2,16,000 minus 10% of Rs 6,00,000 salary is Rs 1,56,000; 50% of salary is Rs 3,00,000. The least is Rs 1,56,000, so that much HRA is exempt and the remaining Rs 84,000 is taxable.

Frequently asked questions

Can I claim HRA exemption if I pay rent to my parents?

Yes, if the arrangement is genuine: your parents own the property, you actually transfer the rent, and they declare it as income. Keep proof.

Do I need the landlord’s PAN?

Yes, if the rent you pay in the year exceeds Rs 1,00,000. Below that, a declaration is usually enough.

Can I claim HRA and a home loan at the same time?

Possible, but only where the facts support it, for instance you rent in your work city and own a home elsewhere, or your own home is genuinely not occupiable by you. It invites scrutiny, so the reason must be real.

Work out your exact exemption with the HRA Exemption Calculator, declare it via Form 12BB, and see the tax impact in the Income Tax Calculator.