HRA (House Rent Allowance) is a salary component that helps employees cover rental expenses. Under Section 10(13A) of the Income Tax Act, 1961, and Rule 2A, a portion of HRA is exempt from tax if certain conditions are met.
1. Eligibility for HRA Exemption
- Only for salaried employees(not self-employed) .
- Must live in rented accommodation(not self-owned) .
- HRA must be part of salary structure(CTC) .
- Only under Old Tax Regime(New Tax Regime does not allow HRA exemption) .
2. HRA Exemption Calculation [Rule 2A]
The exempt amount is the least of the following:
| CONDITION | METRO CITIES (DELHI, MUMBAI, CHENNAI, KOLKATA) | NON-METRO CITIES |
| 1. Actual HRA Received | Full HRA amount | Full HRA amount |
| 2. % of Salary | 50% of (Basic + DA) | 40% of (Basic + DA) |
| 3. Rent Paid – 10% of Salary | (Annual Rent) – 10% of (Basic + DA) | (Annual Rent) – 10% of (Basic + DA) |
Salary Definition: Basic + DA (if part of retirement benefits) + Fixed % commission .
3. Example of HRA Calculation
Employee Details:
- Basic Salary:₹30,000/month
- DA:₹5,000/month
- HRA Received:₹15,000/month
- Rent Paid:₹12,000/month (Mumbai – Metro City)
Annual Calculation:
| CONDITION | CALCULATION | AMOUNT (₹) |
| 1. Actual HRA Received | 15,000 × 12 | 1,80,000 |
| 2. 50% of (Basic + DA) | 50% × (35,000 × 12) | 2,10,000 |
| 3. Rent Paid – 10% of Salary | (12,000 × 12) – (10% × 4,20,000) | 1,44,000 – 42,000 = 1,02,000 |
Exempt HRA = Least of above (₹1,02,000)
Taxable HRA = Total HRA (₹1,80,000) – Exempt (₹1,02,000) = ₹78,000
4. Documents Required for HRA Claim
- Rent receipts(with landlord’s name, rent amount, duration) .
- Rental agreement(if rent > ₹1 lakh/year, landlord’s PAN required) .
- Bank proof(if rent paid via bank transfer) .
- Form 12BB(submitted to employer for TDS adjustment) .
5. Special Cases
(A) Living with Parents
- Can pay rent to parents & claim HRA .
- Parents must declare rent as incomein their ITR .
(B) No HRA from Employer?
- Section 80GGallows rent deduction (max ₹5,000/month) if:
- No HRA received.
- No owned house in the same city .
(C) Home Loan + HRA
- Can claim both if:
- Owned house is far from workplace.
- Rented house is near office
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