HRA Exemption

HRA refers to House Rent Allowances, which an employer provides to its employees in order to meet the expenses of rented accommodation. House rent allowance is defined under section 10(13A) and rules 2A of the Income Tax Act 1961. Generally, house rent allowances are taxable; however, the income tax act provides HRA exemption in certain conditions. Nevertheless, the Act also states the HRA exemption limits or maximum HRA exemption.

Read more
Save Tax
Upto ₹46,800 Under Sec 80C
Best Tax Saving Plans
  • High Returns

    Get Returns as high as 17%*
  • Zero Capital Gains tax^

    unlike 10% in Mutual Funds
  • Save upto Rs 46,800

    in Tax under section 80 C
We are rated~
58.9 Million
Registered Consumer
Insurance Partners
26.4 Million
Policies Sold
In-built life cover
Get Instant Tax Receipts
Save upto ₹46,800 in Taxes Under Section 80C
We don’t spam
View Plans
Please wait. We Are Processing..
Your personal information is secure with us
Plans available only for people of Indian origin By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company
Get Updates on WhatsApp
We are rated~
58.9 Million
Registered Consumer
Insurance Partners
26.4 Million
Policies Sold

Eligibility Criteria to Claim HRA Exemption

An individual is considered to be eligible to claim HRA exemption under section 10(13A) of the Income Tax Act, 1961 if he meets the following requirement:

  1. Salaried employee

    The person claiming HRA exemption must be a salaried employee. However, as per section 13(13A) of the Act, a self-employee may also claim the HRA exemption if residing in a rented house. 

  2. Rented house

    The assessee cannot claim the HRA exemption if he owns a house and resides in it. It is the basic criteria that one must live in a rented house to claim an HRA exemption. No HRA calculation can be made if he lives in his own home. However, an assessee may pay rent to the family member. It is not mandated by the statutory that an assessee cannot pay rent to his father, siblings, or any other family member. For example, if the house property belongs to the father, he may mandate his son to pay the rent. However, it is advisable for the son to maintain receipts for the rent paid to the father. He must possess the necessary documents to substantiate his proof of paying rent.

  3. Proof of rent paid

    The assessee must possess the receipt of a valid house rent. It means if an individual does not pay any rent and receives a house rent allowance from the employer, he is bound to pay tax, and the amount of HRA will be fully taxable.

Invest & Save upto ₹46,800 per annum in taxInvest & Save upto ₹46,800 per annum in tax

Calculation of HRA

One can calculate the exemption value of HRA on the basis of several factors. For example, it includes the actual rent that an employee pays, the HRA that an employee receives from the employer, and whether the employee resides in a metro or non-metro city. Therefore, the lowest amount among the three factors will be exempted from the taxable income while calculating HRA. 

Let us understand it broadly.

  1. HRA allowance

    HRA Allowance is the actual salary amount that an employee receives from his employer. Apart from basic salary, HRA allowance holds a separate column among salaries. 

  2. Actual rent

    The actual rent is the value that a tenant pays to his landlord. So while calculating the HRA exemption amount, the assessee can subtract the actual rent value from the 10% of the basic salary he receives from the employer.

  3. Metro and Non-metro city

    Four cities, i.e., Mumbai, Delhi, Kolkata, and Chennai, are considered metro cities in India. So, the employees residing in these cities are required to calculate 50 percent of their basic salary and Dearness Allowance (DA).

    In the case of non-metro cities, the employees are required to calculate the value of 40% of their basic salary and dearness allowance.

Let us see how to comprehend these values mentioned above.

One can consider the following example to comprehend the HRA formula better:

Mr. Aryasumant resides in Bangalore, where he carries on his work. He has rented accommodation where he pays INR 6,000 on a monthly basis. The salary he receives from his employer is:

Basic salary: INR 24,000

HRA: INR 9,000

Allowances: INR 9,000

PF (Provident Fund): INR 3,000

Hence, his total salary is INR 45,000

  • In the first step, the assessee must calculate the total HRA received annually. So, his annual HRA is,

=9000 x 12

= INR 1,08,000

  • In the second step, he must assess the rent he pays the landlord - 10% of his basic salary. It can be further calculated as,

Actual rent = 6,000 x 12

= INR 72,000

10 percent of the basic salary

Basic salary = 24,000 x 12

= INR 2,88,000

10 per cent of INR 2,88,000 = (2,88,000 x 10) / 100

= INR 28,800

Actual rent - 10 percent of basic salary

72,000 - 28,800

= INR 43,200

  • Since the assessee resides in a non-metro city, he must calculate 40 percent of his basic salary plus dearness allowance.

Basic salary = 24,000 x 12

= INR 2,88,000

Dearness allowance = 9000 x 12

= INR 1,08,000

Basic salary + Dearness allowance

288000 + 10800

= INR 2,98,800

40 per cent = (298800 x 40) / 100

= INR 1,19,520

The lowest amount falls under the HRA exemption. In this case, the lowest amount will be,

INR 1,08,000

INR 43,200

INR 1,19,520

= INR 43,200/-


An employee does not become eligible for HRA exemption if he receives the allowance from the employer. Certain conditions should be satisfied, and the employee must reside in rented accommodation. In addition, the HRA he receives annually cannot be fully exempted from the taxable income. An assessee may claim the HRA exemption even if he resides with the parents, provided the house property must belong to either parent. In addition, he must furnish substantial evidence proving that the assessee pays rent to the parents. However, the rent paid to the spouse is not eligible for HRA exemption. It is important to note that if the annual rent exceeds INR 1,00,000, the assessee must furnish the landlord's PAN card to claim HRA exemption. In the absence of a PAN card, he can produce the signed declaration of the landlord.


  • Under which sections of Income Tax Act an assessee may claim the HRA exemption?

    An assessee may claim the HRA exemption under section 10 (13A) or section 80 GG of the Income Tax Act 1961.
  • Can I claim an HRA exemption while paying the rent to a family member?

    Yes, an assessee may pay rent to a family member in order to claim HRA exemption, provided the house property must belong to the family member who collects the rent. It is provided further from the precedents that the HRA exemption cannot be claimed if the assessee pays the rent to the spouse.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
~Source - Google Review Rating available on:-

Income Tax articles

Recent Articles
Popular Articles
Withholding Tax

02 Jul 2024

Withholding tax, also known as Tax Deducted at Source (TDS) in
Read more
Section 80EEA - Deduction for Interest on Home Loan

05 Jun 2024

Section 80EEA of the Income Tax Act provides a significant tax
Read more
Section 80CCE of the Income Tax Act

29 May 2024

Section 80CCE of the Income Tax Act provides taxpayers with
Read more
Section 80CCC of the Income Tax

06 May 2024

Section 80CCC, part of the broader 80C category in the Income
Read more
Income Tax Proof

28 Feb 2024

Income tax proofs play an important role during tax assessment
Read more
Deductions in New Tax Regime under Union Budget 2024
  • 14 Feb 2020
  • 40250
The Union Budget on 23 July 2024 declared an increase in the standard deduction of the new tax regime from
Read more
What is Form 16 & How to Download It
  • 17 Jan 2017
  • 215576
Form 16 is a crucial document in India for salaried individuals. Issued by your employer, it acts as a bridge
Read more
Leave Encashment Tax Exemption - Section 10(10AA)
  • 04 Jan 2024
  • 3868
Leave Encashment Tax Exemption under Section 10(10AA) provides a significant financial benefit for employees
Read more
Section 80CCD (1) and 80CCD (2)
  • 28 Mar 2023
  • 11289
The Government of India notifies pension schemes that can help salaried and self-employed individuals to get tax
Read more

Download the Policybazaar app
to manage all your insurance needs.