Updated: August 2025
Author: Rakesh Kumar | Chartered Accountant | Tax & Finance Consultant
Introduction: What is House Rent Allowance (HRA)?
House Rent Allowance (HRA) is a component of salary paid by employers to employees to help meet the cost of rented accommodation. While it forms part of your salary, the Income Tax Act allows partial or full exemption on HRA under Section 10(13A), making it a powerful tool for tax saving.
If you live in a rented house and receive HRA as part of your salary, you can claim tax exemption, subject to conditions and limits.
Who Can Claim HRA Exemption?
To be eligible for HRA tax exemption:
- You must be a salaried individual.
- You must receive HRA as a part of your salary
- You must live in a rented house and pay rent for the same.
- You should not own a house in the same city you are working in.
Self-employed individuals are not eligible to claim HRA, but they can claim rent paid under Section 80GG.
📊 How is HRA Exemption Calculated?
The least of the following three is exempt under Section 10(13A):
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Actual HRA received from your employer.
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50% of salary (basic + DA) if living in a metro city (Delhi, Mumbai, Kolkata, Chennai), or 40% if in a non-metro.
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Rent paid minus 10% of salary (basic + DA).
✅ Example Calculation:
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Basic salary: ₹30,000/month
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HRA received: ₹15,000/month
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Rent paid: ₹12,000/month
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City: Non-metro
HRA exemption = Least of:
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Actual HRA = ₹15,000
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40% of salary = ₹12,000
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Rent paid – 10% of salary = ₹12,000 – ₹3,000 = ₹9,000
👉 Exempted HRA = ₹9,000/month (₹1,08,000/year)
📁 Documents Required to Claim HRA
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Rent receipts with landlord details (name, address, PAN if rent > ₹1,00,000/year)
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Rental agreement (recommended)
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PAN of landlord if rent exceeds ₹8,333/month (₹1,00,000 annually)
🔍 Common Scenarios and FAQs
1. Can I claim HRA if I live with my parents?
Yes! If you pay rent to your parents and have valid rent receipts, you can claim HRA. Your parents must show it as income in their return.
2. Can I claim HRA and home loan interest together?
Yes, if you own a house in another city and live on rent elsewhere due to work.
3. What if my employer doesn’t provide HRA?
You can claim deduction under Section 80GG subject to conditions.
✍️ Pro Tips from a CA
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File rent receipts regularly with your employer to avoid tax deduction.
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If you missed claiming HRA through salary, you can still claim it while filing your ITR.
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Maintain proof of rent payment like bank statements or UPI transfers.
