What is HRA Exemption?
House Rent Allowance (HRA) is a component of salary that can be partially or fully exempt from tax under Section 10(13A). The exemption is available only under the old tax regime.
HRA Calculation Formula
HRA exemption is the minimum of these three:
- (A) Actual HRA received from your employer
- (B) 50% of (Basic + DA) for metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40% for non-metro
- (C) Rent paid minus 10% of (Basic + DA)
HRA Calculation Example
For a person with Basic Salary of ₹6 lakh, HRA of ₹2.4 lakh, Rent of ₹3 lakh in a metro city:
| Component | Calculation | Amount |
|---|---|---|
| (A) Actual HRA | As received | ₹2,40,000 |
| (B) 50% of Basic | 50% x ₹6,00,000 | ₹3,00,000 |
| (C) Rent - 10% of Basic | ₹3,00,000 - ₹60,000 | ₹2,40,000 |
| Exempt HRA | Minimum of A, B, C | ₹2,40,000 |
Key Rules for HRA
- HRA exemption is not available under the new tax regime
- You must actually pay rent - self-occupied house owners cannot claim
- Rent paid to parents is allowed with a valid rent agreement
- Landlord's PAN is mandatory if annual rent exceeds ₹1 lakh
- DA is included only if it forms part of retirement benefits