Claiming House Rent Allowance (HRA) Exemption
Salaried employees in India can deduct rental expenses from taxable salary under Section 10(13A). Learn the rules, metro criteria, and how to verify compliance.
Course Overview
House Rent Allowance (HRA) is an important salary component paid by employers to employees living in rented accommodation. Under Section 10(13A) of the Income Tax Act, 1961, salaried individuals can deduct their rental expenses from their taxable salary, helping them save substantial amounts of tax.
HRA tax exemptions can only be claimed if you choose the Old Tax Regime. Under the New Tax Regime (simplified default slabs), HRA exemptions are completely disallowed. Standard Deduction is the only main component retained under the New Regime.
Key Specifications
| Statutory Act | Income Tax Act, 1961 |
| Section Reference | Section 10(13A) read with Rule 2A |
| Exemption Scope | Salaried individuals living in rented accommodations |
| Regime Availability | Old Tax Regime Only (Disallowed in New Regime) |
| Mandatory Proofs | Rent Receipts, Landlord PAN (if rent > ₹1 Lakh/year) |
Exemption Slabs & Calculations
Your exempt HRA is not simply the total rent paid. It is defined as the minimum of three key parameters:
Actual HRA
The actual House Rent Allowance component received from your employer.
Excess Rent Paid
The total rent paid minus 10% of your Basic Salary (+ Dearness Allowance).
Salary Limit Slabs
50% of Basic Salary if renting in a Metro city, or 40% if renting in a Non-Metro city.
💡 Metro vs. Non-Metro Classification Note
For HRA calculation purposes, only four cities are legally classified as Metros: Delhi, Mumbai, Kolkata, and Chennai.
Major IT and business hubs like Bangalore, Hyderabad, Gurgaon, and Pune are classified as Non-Metros, meaning their salary limit cap is 40% instead of 50%.
Claim Checklist & Timelines
Calculate Exemption Limit
Use our free HRA Exemption Calculator to test limits based on salary, rent, and city.
Generate Rent Receipts
Generate signed monthly receipts using the Rent Receipt Generator. The tool packages all 12 receipts into a single PDF locally using WebAssembly.
Acquire Landlord's PAN
If rent exceeds ₹1 Lakh per year, obtain the landlord's PAN. If they don't hold a PAN card, generate a signed declaration using our Landlord PAN Declaration Tool.
Complete Form 12BB Declaration
Pre-fill your Form 12BB PDF declaration, attach your receipts, and use our HR Email Draft Assistant to compose a draft email to submit to your HR coordinator.
Frequently Asked Questions
Can I claim both HRA and Home Loan tax exemptions?
Yes, you can claim both HRA and home loan interest (Section 24(b)) and principal repayment (Section 80C) exemptions if you own a home but reside in a rented house in the same or a different city due to employment reasons.
What basic salary components are used for HRA calculations?
For HRA calculation, 'Salary' includes Basic Salary + Dearness Allowance (DA) + commission based on a fixed percentage of turnover. Other allowances, bonuses, or variables are excluded.
Can I claim HRA if I pay rent to my parents?
Yes, you can pay rent to your parents and claim HRA exemptions. However, the transaction must be legitimate: you must make monthly bank transfers, have a formal rent agreement, issue rent receipts, and your parents must declare this rent as rental income in their ITR.
Authority & Official Sources
- Income Tax Department HRA Exemption Rules: incometaxindia.gov.in
- CBDT Guidelines on Rent Exemption Claims (Rule 2A): IT Rules, 1962 Reference