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HRA Exemption in India: How Renters and Homeowners Can Claim It
If you receive House Rent Allowance (HRA) as part of your salary and you pay rent, the HRA exemption under Section 10(13A) of the Income Tax Act 2025 can cut your taxable income by up to ₹1 lakh per year. If you own a home with a home loan, you can claim a deduction on the interest under Section 24(b).
What is the HRA exemption?
The HRA exemption is a deduction under Section 10(13A) of the Income Tax Act 2025 for salaried employees. Your employer pays HRA as part of your salary to help cover your rent costs. The amount you receive is partly or fully exempt from income tax — but only if you actually pay rent and you can prove it.
To claim it, three conditions must be met:
- You must be a salaried employee (not a freelancer or business owner)
- You must receive HRA as part of your salary (shown separately in your pay slip)
- You must pay rent for accommodation — your landlord’s name must appear on the rent receipts
The Income-tax Rules 2026 (Rule 3) set out how the exemption is calculated.
How is the HRA exemption calculated?
The exempt amount is the least of three figures:
- The HRA your employer actually pays you
- 50% of your salary (basic + DA) if you live in a metro city (Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, or Ahmedabad), or 40% if you live elsewhere
- Your actual rent paid minus 10% of your salary
Your salary here means basic pay plus any dearness allowance that regularly forms part of your salary. Leave travel allowance, bonuses, and overtime do not count.
Worked example — ₹50,000/month rent in Mumbai
| Detail | Figure |
|---|---|
| Basic salary + DA per month | ₹80,000 |
| HRA received per month | ₹32,000 |
| Rent paid per month | ₹50,000 |
| Salary for HRA calculation | ₹80,000 |
Step 1 — 50% of salary (metro): ₹80,000 × 50% = ₹40,000
Step 2 — Actual rent minus 10% of salary: ₹50,000 − (₹80,000 × 10%) = ₹50,000 − ₹8,000 = ₹42,000
Step 3 — Least of the three:
- HRA received: ₹32,000
- 50% of salary: ₹40,000
- Rent minus 10%: ₹42,000
Least = ₹32,000 per month = ₹3,84,000 per year is the exempt amount.
Tax saved at 30% bracket: ₹3,84,000 × 30% = ₹1,15,200 per year
Even if your actual rent is higher, the exemption is capped at the HRA your employer actually pays you.
What if you live in your own house or pay no rent?
You cannot claim the HRA exemption if you own the house you live in and pay no rent. In that case, the entire HRA you receive from your employer becomes taxable salary.
However, if you have a home loan on a property you own and occupy (or let out), you can claim a deduction on the interest under Section 24(b) of the Income Tax Act 2025:
- Self-occupied property: up to ₹2 lakh per year in interest deduction
- Let-out or deemed-let-out property: no upper cap — all the interest is deductible, but the loss can be set off against other income (up to ₹2 lakh if self-occupied, beyond that is unrestricted)
This is a different deduction from HRA and applies whether or not you receive HRA from your employer.
What about paying rent to a family member?
You can pay rent to a family member (such as parents or siblings) and claim HRA exemption on that payment — as long as the arrangement is genuine and documented. The landlord family member must declare the rent as income in their own tax return. Paying rent to a spouse is generally not accepted by the tax department as a valid claim.
How to claim HRA exemption
Through your employer (during the year)
Submit these documents to your HR or finance team at the start of the financial year or when you begin paying rent:
- Rent receipts — signed by the landlord, showing the landlord’s name, address, PAN (if rent exceeds ₹1 lakh per year), and the period covered
- Landlord’s PAN copy — required when annual rent exceeds ₹1 lakh (Rule 31A, Income-tax Rules 2026)
- Rent agreement — a copy of the tenancy or rental agreement
Your employer will reduce your taxable salary by the exempt HRA amount each month. Keep original receipts safe — the employer may ask to see them at any time during the year.
At the time of ITR filing
If your employer did not account for HRA (perhaps you started paying rent mid-year, or you forgot to submit documents), you can claim the exemption yourself when you file your ITR. You will need:
- Form 16 from your employer (showing salary and HRA paid)
- Rent receipts and landlord PAN (for audit purposes)
- Your employer’s name and address (in case the Assessing Officer asks for verification)
File using ITR-1 if your only income is salary and bank interest, and claim the HRA exemption in the “Deductions” section of the ITR form.
HRA and the new tax regime
Under the new tax regime (which has been the default since the Income Tax Act 2025 came into force on 1 April 2026), standard deduction of ₹75,000 is available but HRA exemption is not available. The new regime offers higher slab rates but removes most separate deductions including HRA, standard deduction on rent, and most Section 80 deductions.
Under the old regime, HRA exemption under Section 10(13A) is available in addition to deductions under Sections 80C, 80D, 80CCD(1B), and others.
Whether the old or new regime works better for you depends on your total deductions. If your HRA exemption alone is worth more than ₹75,000 (roughly ₹25,000 per month in exempt HRA), the old regime may leave you better off.
Use the Income Tax Calculator to compare both regimes with your actual HRA amount.
Documents you need for HRA
| Document | When required |
|---|---|
| Rent receipts (signed, with landlord details) | Every year, before the financial year starts |
| Rent agreement or tenancy letter | If rent exceeds ₹5,000 per month |
| Landlord PAN | If annual rent exceeds ₹1 lakh |
| Form 16 | When filing your ITR |
Keep rent receipts for at least 4 years — the tax department can raise questions about HRA claims up to 4 years after filing.
Common mistakes to avoid
Claiming HRA without paying rent: The exemption is only for actual rent paid. If you live with parents and contribute to household expenses, that is not rent — claiming HRA on it is a tax risk.
Not reporting PAN of landlord: When annual rent exceeds ₹1 lakh, sharing the landlord’s PAN is mandatory under Rule 31A of the Income-tax Rules 2026. Failing to do so can result in disallowance of the exemption.
Ignoring the metro rule: The 50% cap applies only if your place of employment is in Mumbai, Delhi, Chennai, Kolkata, Bengaluru, Hyderabad, Pune, or Ahmedabad. Under the Income-tax Rules 2026 (Rule 279, Schedule III), Pune and Ahmedabad were added to the metro list from FY 2026-27. For other cities, the cap is 40%.
Claiming for a spouse-owned property: Rent paid to a spouse for a jointly-owned home is not accepted as HRA-eligible rent by the tax department.
Frequently asked questions
Can I claim HRA if I get a rent allowance but do not have receipts? No. You need genuine rent receipts and ideally a rental agreement. Without supporting documents, the exemption can be disallowed during a tax audit.
My employer does not give HRA. Can I still claim a deduction? No. The Section 10(13A) HRA exemption applies only to HRA received as part of your salary. If your employer does not pay HRA, there is no exemption to claim under this section. However, if you have a home loan, you can still claim Section 24(b) interest deduction.
I live in my own house but pay EMI on a home loan. Can I claim anything? Yes. Under Section 24(b) of the Income Tax Act 2025, you can deduct up to ₹2 lakh per year in home loan interest for a self-occupied property. If the property is let out, there is no upper cap.
Can I claim HRA and also claim home loan interest at the same time? No — you cannot claim HRA exemption for a property you own, even if you are paying a home loan on it. You must choose: HRA exemption if you pay rent for someone else’s property, or Section 24(b) home loan interest deduction if you own the property.
Sources: Section 10(13A), Income Tax Act 2025; Rule 3, Income-tax Rules 2026; Section 24(b), Income Tax Act 2025; CBDT circular on HRA (verified 2026-10-08).