HRA Exemption Calculation Under explained: this guide covers what HRA Exemption Calculation Under means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
House Rent Allowance (HRA) is one of the most common tax-saving components in a salaried employee's compensation structure. The exemption is governed by Section 10(13A) of the Income Tax Act 2025 (read with Rule 2A of the Income Tax Rules). It is available only in the old tax regime.
The Three-Part HRA Formula
The exempt HRA is the minimum (least) of the following three amounts:
- Actual HRA received from employer
- 50% of salary (Delhi, Mumbai, Kolkata, Chennai) OR 40% of salary (all other cities)
- Actual rent paid minus 10% of salary
Salary for HRA = Basic Pay + Dearness Allowance (if forming part of retirement benefits) + Fixed commission on turnover (if applicable).
HRA Calculation Example
Ravi works in Bangalore (non-metro). Monthly salary: Basic Rs.60,000, DA Rs.10,000. HRA received: Rs.25,000/month. Monthly rent paid: Rs.22,000.
- Annual values: Basic+DA = Rs.8,40,000; HRA = Rs.3,00,000; Rent = Rs.2,64,000
- Amount 1 (Actual HRA): Rs.3,00,000
- Amount 2 (40% of salary for non-metro): 40% × 8,40,000 = Rs.3,36,000
- Amount 3 (Rent − 10% of salary): 2,64,000 − 84,000 = Rs.1,80,000
- Exemption = Min = Rs.1,80,000
- Taxable HRA = Rs.3,00,000 − Rs.1,80,000 = Rs.1,20,000
Documentation Requirements
| Rent Amount | Documents Required |
|---|---|
| Up to Rs.3,000/month | Rent receipts (optional but recommended) |
| Above Rs.3,000/month | Rent receipts (mandatory per employer's policy) |
| Annual rent above Rs.1,00,000 | Landlord's PAN mandatory + Form 60 if no PAN |
Rent Receipts: What They Must Contain
- Date of receipt
- Name and address of tenant (employee)
- Amount paid (in words and figures)
- Period (month) for which paid
- Name, address, and signature of landlord
- Revenue stamp (for amounts > Rs.5,000 per receipt in some states)
Special Situations
Renting from Relatives
Permitted. Payments to spouse are typically not recognized (since the arrangement is not considered genuine commercially). Payments to parents, siblings, or in-laws are allowed if genuine and the relative declares rental income in their ITR.
Company-Owned Accommodation + HRA
Not allowed. If employer provides accommodation (perquisite), HRA cannot be claimed for the same period. Perquisite value is added to salary; HRA is fully taxable.
Self-Owned Property in Same City
If you own a house in the same city where you live and work, HRA exemption is generally denied since your own accommodation is available. If you still rent (and let out your own house), you may need to justify the arrangement.
Section 80GG for Non-HRA Employees
If you are an employee/self-employed without HRA component or employer-provided accommodation, you can claim deduction under Section 80GG (old regime) = least of: Rs.5,000/month, 25% of AGTI, or rent − 10% AGTI. You must file Form 10BA.
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