How is HRA exemption calculated?

HRA exemption equals the least of three values: (1) actual HRA received from employer, (2) 50% of basic + DA for metro cities or 40% for non-metro, (3) rent paid minus 10% of basic + DA. Whichever is lowest is your exempt amount; the remaining HRA is taxable as salary.

Is HRA exemption available under the new tax regime?

No. HRA exemption under Section 10(13A) is available only under the old tax regime. The new regime (default from FY 2023-24) forfeits all major deductions including HRA, 80C, 80D, home loan interest, and standard exemptions beyond the ₹75K standard deduction.

Which cities qualify as "metro" for HRA?

Only four cities qualify as metro under the Income Tax Act for HRA purposes: Delhi, Mumbai, Kolkata, and Chennai. All other cities including Bengaluru, Hyderabad, Pune, Ahmedabad, and Gurugram are classified as non-metro for HRA (despite being cost-of-living metros). Metro gets 50% of basic+DA, non-metro gets 40%.

Do I need to submit rent receipts to claim HRA?

Yes, to your employer for TDS purposes (monthly or annually depending on company policy). If annual rent exceeds ₹1 lakh, you also need the landlord's PAN on the rent receipt. Without PAN above ₹1L threshold, the exemption is denied by Assessing Officer even if the rent was genuinely paid.

Can I claim HRA if I pay rent to parents?

Yes, but with conditions: (1) parents must actually own the property you're renting, (2) rent must actually be paid (bank transfer, not cash), (3) parents declare the rent as income in their ITR, (4) landlord PAN on receipts if rent exceeds ₹1L/year. Many assessees get into trouble here — if audited and the rent wasn't genuinely paid, it becomes disallowed.

Can I claim HRA and home loan deduction together?

Yes, if the rented property and the owned property are in different cities (e.g., rent in Bengaluru, owned home in hometown let-out or self-occupied elsewhere). HRA under 10(13A) and home loan interest under Section 24(b) are independent sections — both can be claimed simultaneously if factually justified.

What if I don't have HRA component in my salary?

If your salary structure doesn't include HRA (rare in salaried packages but common in freelancer / consultant structures), you can claim rent deduction under Section 80GG instead — up to ₹60K/year (₹5K/month) subject to certain conditions. 80GG is a smaller benefit but better than zero.

HRA Exemption India FY 2026-27: Section 10(13A) Rules + Worked Examples

HRA (House Rent Allowance) exemption is the single largest tax-saving lever available to salaried renters in India under the old regime — for a Mumbai renter on ₹25L CTC paying ₹45K/month, it’s a ~₹4L/year deduction (~₹1.2L of actual tax saved at 30% slab). Here’s the full FY 2026-27 breakdown of Section 10(13A), the least-of-three formula, and worked examples across salary bands.

The formula, plainly

HRA exempt from tax is the least of these three:

Actual HRA received from employer
50% of (Basic + DA) if you live in metro (Delhi / Mumbai / Kolkata / Chennai), else 40%
Rent paid minus 10% of (Basic + DA)

Remaining HRA (actual received minus exempt) is taxable as part of salary. There’s no lower cap — the formula can work out to zero exemption if your rent is low vs basic.

Run your exact exemption on our HRA Exemption Calculator — it auto-applies the metro/non-metro rule and shows which of the three limits is binding.

Metro vs non-metro: only four cities count

This is the most-misunderstood piece. Income Tax Act defines “metro” strictly:

Metro (50% of basic+DA): Delhi, Mumbai, Kolkata, Chennai — these 4 only
Non-metro (40% of basic+DA): everyone else, including Bengaluru, Hyderabad, Pune, Ahmedabad, Gurugram, Noida, Gurgaon

This is quirky — Bengaluru is a Tier-1 cost-of-living city but gets the non-metro 40% limit. For high-basic salaries, this costs 10 percentage points of the limit. A case has been made to extend the metro list, but as of FY 2026-27 it’s still the same four cities.

Worked example 1: Bengaluru, ₹15L CTC, ₹20K rent

Sneha in Bengaluru, CTC ₹15L, Basic ₹7L (46.7%), HRA ₹2.8L (40% of basic), pays ₹20K/month rent = ₹2.4L/year.

HRA exemption calculation for Sneha in Bengaluru.
Limit	Value
Actual HRA received	₹2,80,000
40% of basic+DA (non-metro)	₹2,80,000
Rent paid minus 10% of basic	₹2,40,000 - ₹70,000 = ₹1,70,000
HRA exemption (least of three)	₹1,70,000

Sneha exempts ₹1.7L from tax. In the 30% slab, that saves ~₹53K of actual tax. The taxable portion of HRA is ₹2.8L - ₹1.7L = ₹1.1L, added back to salary income.

Worked example 2: Mumbai, ₹25L CTC, ₹45K rent

Karan in Mumbai (metro), CTC ₹25L, Basic ₹11.25L (45%), HRA ₹5.625L (50% of basic), rent ₹45K/month = ₹5.4L/year.

HRA exemption calculation for Karan in Mumbai (metro).
Limit	Value
Actual HRA received	₹5,62,500
50% of basic+DA (metro)	₹5,62,500
Rent paid minus 10% of basic	₹5,40,000 - ₹1,12,500 = ₹4,27,500
HRA exemption (least of three)	₹4,27,500

Karan exempts ₹4.275L. At 30% slab, that’s ~₹1.33L of actual tax saved. The remaining ~₹1.35L HRA is taxable.

Worked example 3: Gurugram, ₹10L CTC, ₹18K rent

Rahul in Gurugram (non-metro despite being NCR), CTC ₹10L, Basic ₹4.5L (45%), HRA ₹1.8L (40%), rent ₹18K/month = ₹2.16L/year.

Actual HRA: ₹1,80,000
40% of basic: ₹1,80,000
Rent minus 10% basic: ₹2,16,000 - ₹45,000 = ₹1,71,000
Exemption: ₹1,71,000

Rahul’s rent-minus-10%-basic limit is binding. He saves ~₹35K in 20%-slab tax (₹10L CTC typically falls in 20% slab).

When exemption = zero (the trap)

If your rent is less than 10% of basic, the third limit (rent-minus-10%-basic) is negative, which makes exemption = zero. Example:

Basic ₹10L, so 10% = ₹1L
Rent ₹8K/month = ₹96K/year
Rent minus 10% basic = ₹96K - ₹1L = -₹4K
Exemption = zero (no tax benefit)

This traps employees with parent-owned or company-provided low-rent housing while still having HRA in salary structure. Solution: either rent a proper market-rate place or restructure salary (drop HRA component).

Documents required to claim HRA

What your employer (or Assessing Officer if audited) wants to see:

Rent receipts: monthly, signed by landlord, with revenue stamp (₹1 above ₹5,000/month). Most employers collect yearly in January-February for the FY.
Landlord PAN: mandatory if annual rent exceeds ₹1 lakh. Without PAN, employer denies HRA exemption and the assessee must claim in ITR at own risk. If unable to get PAN, obtain Form 60 declaration.
Rent agreement: registered if rent above ₹15K/month in many states; minimum a notarised agreement. One rent agreement covers multiple years typically.
Bank-transfer proof: strongly recommended. Cash rent payments are red flags during assessment; UPI / NEFT transfers to landlord’s account establish genuineness.

Paying rent to parents — the right way

Paying rent to parents is legally valid for HRA exemption, but the CBDT and Assessing Officers scrutinise it heavily. Do it right:

Property ownership: parent(s) must be the registered owner of the property you’re occupying.
Actual payment: transfer rent via NEFT / UPI / cheque monthly. Not cash. Not adjustment against other transactions.
Market-rate rent: Rent must be reasonable (benchmark against similar properties in the locality). ₹2,000 to mother for a Mumbai 2BHK doesn’t pass the market-rate test.
Parent declares income: the rent is the parent’s taxable income. They must include it in their ITR. Standard 30% deduction on rental income applies (Section 24).
Rent receipt + PAN: parent provides signed receipt + PAN if rent > ₹1L/year.

Skipping any of these = the assessee loses the exemption + potential penalty. Genuine arrangement + paper trail = clean.

HRA + Home Loan deduction — claim both?

Yes, it’s legal if the factual situation supports it. Two common scenarios:

Work in City A, own home in City B: You rent in the work city and have a home loan on an owned property in hometown. Claim HRA for work-city rent + Section 24(b) for home loan interest (self-occupied: up to ₹2L) or (let-out: no cap). Fully defensible.
Same city, rented while home is under construction: During construction, you rent elsewhere. Claim HRA for current rent + pre-construction interest (deductible in 5 equal instalments starting FY of possession). Once you move in, HRA stops; regular Section 24(b) claim begins.
Same city, owned home vacant, renting nearby: Harder to justify. Assessing Officer may deem the owned home as “self-occupied” and disallow HRA unless you can show genuine reason (e.g., owned home is too far from office, not habitable, under dispute).

HRA under old vs new regime

HRA availability across old vs new tax regime.
Feature	Old Regime	New Regime (default)
HRA exemption under 10(13A)	Yes	No
80C (PPF/ELSS/EPF ₹1.5L)	Yes	No
Home loan interest (24b)	Up to ₹2L	No (self-occupied)
Standard deduction	₹50,000	₹75,000
Rebate (under ₹12L income)	None	Full rebate

For Mumbai / Delhi renters paying ₹40K+/month, the HRA exemption alone often justifies the old regime. Run both scenarios via the Income Tax Calculator to see which lands lower tax.

Section 80GG: the fallback for no-HRA employees

If your salary structure doesn’t have HRA (rare in traditional salaries, common in consultant / freelancer arrangements), Section 80GG allows rent deduction subject to:

Amount: least of ₹5,000/month (₹60K/year), 25% of adjusted total income, or rent minus 10% of total income
Conditions: no HRA in salary AND you (or spouse/minor child/HUF) don’t own a residential property in the city of work
Form: file Form 10BA with ITR declaring the above

80GG caps out at ₹60K vs HRA’s uncapped potential — request HRA restructuring from employer if your rent is substantial.

Common mistakes to avoid

Forgetting landlord PAN above ₹1L rent. Most frequent HRA denial reason. Get PAN on day 1 of tenancy.
Cash rent payments. Audit red flag. Always transfer via bank.
Missing the metro distinction. Bengaluru is non-metro (40%). Accepting 50% limit in your mental math costs you accuracy.
Parent-rent arrangement without genuineness. Ensure actual transfer + parent ITR + market-rate rent. Don’t round-trip the money back to yourself via gift.
Switching to new regime without re-checking. FY 2026-27 default is new regime. HRA-heavy renters must actively opt for old regime during Form 10IEA filing.

Maximising your HRA — three moves

Increase basic %. Higher basic = higher HRA limit (50%/40% of basic+DA). Ask HR at the offer stage — post-joining restructuring is harder.
Choose rent city strategically. If you can work from any metro, Mumbai/Delhi give 50% limit vs 40% in Bengaluru/Hyderabad. On ₹20L basic, that’s ₹2L more exemption.
Time your rent increase. If you’re moving to a larger apartment, increase rent in April (start of FY) so the full 12 months of higher rent counts for the FY’s exemption.

Bottom line

HRA exemption is the largest single tax deduction for most metro-renting salaried employees — often ₹3-5L/year = ₹90K-150K of actual tax saved at 30% slab. Done right (landlord PAN, bank payment, genuine rent), it’s bulletproof. Done sloppily (cash payments, no PAN above ₹1L, parent-rent without paper trail), it’s the most common assessee-loses line in scrutiny.

Compute your exact exemption on the HRA Exemption Calculator. Then compare old vs new regime via the Income Tax Calculator to confirm which regime lands lower total tax for your profile.