What is HRA?
House Rent Allowance (HRA) is a component of salary paid by employers to employees to help them meet rental expenses. Under Section 10(13A) of the Income Tax Act, a portion of HRA can be claimed as tax-exempt if you are living in a rented accommodation. This is only available under the old tax regime — the new regime does not allow HRA exemption.
HRA Exemption Formula
The exempt portion of HRA is the minimum of the following three amounts:
| Option | Formula |
|---|---|
| Option 1 | Actual HRA received from employer |
| Option 2 | Rent paid - 10% of Basic Salary |
| Option 3 | 50% of Basic (Metro) or 40% of Basic (Non-Metro) |
Example Calculation
Let us say you earn ₹10 LPA with Basic Salary of ₹4,00,000/year, HRA of ₹2,00,000/year, and you pay ₹20,000/month rent in Bangalore (non-metro for HRA purposes):
Option 1: Actual HRA = ₹2,00,000
Option 2: Rent paid (₹2,40,000) - 10% of Basic (₹40,000) = ₹2,00,000
Option 3: 40% of Basic = ₹1,60,000 (Bangalore is non-metro for HRA)
HRA Exempt = Minimum of above = ₹1,60,000
Taxable HRA = ₹2,00,000 - ₹1,60,000 = ₹40,000
Metro vs Non-Metro Cities
| Classification | Cities | HRA % |
|---|---|---|
| Metro | Mumbai, Delhi, Chennai, Kolkata | 50% |
| Non-Metro | Bangalore, Hyderabad, Pune, Noida, Gurgaon, all others | 40% |
Explore city-wise salary breakdowns: Bangalore, Mumbai, Delhi.
Documents Required for HRA Claim
- Rent receipts with landlord name, address, and rent amount (monthly/quarterly)
- Rental agreement or lease deed
- Landlord PAN card copy (mandatory if annual rent exceeds ₹1,00,000)
- Bank transfer proof for rent payments (recommended)