How is HRA Exemption Calculated?
Under Section 10(13A), the HRA exempt amount is the lowest of three conditions:
① Actual HRA received from employer
② 50% of Basic (Metro) OR 40% of Basic (Non-Metro)
③ Actual rent paid − 10% of Basic Salary
Tax-Exempt HRA = Minimum of the above three
Metro vs Non-Metro Cities for HRA
Only Delhi, Mumbai, Kolkata, and Chennai are classified as metro cities for HRA calculation — giving you 50% of basic salary. All other cities including Bangalore, Hyderabad, Pune, Ahmedabad, and Jaipur are non-metro and use 40% of basic salary.
HRA Exemption Example
Basic salary ₹50,000/month, HRA received ₹20,000/month, rent paid ₹18,000/month, city: Mumbai (metro):
① Actual HRA = ₹20,000
② 50% of Basic = ₹25,000
③ Rent − 10% of Basic = ₹18,000 − ₹5,000 = ₹13,000
Tax-Exempt HRA = ₹13,000/month | Annual = ₹1,56,000
Tips to Maximise HRA Tax Exemption
Ensure rent paid exceeds 10% of basic salary. Keep rent receipts and a valid rent agreement. For rent above ₹1 lakh/year, provide your landlord's PAN. You can claim both HRA exemption and home loan interest deduction under Section 24 if you rent in one city and own property in another.
Related Calculators
Use our In-Hand Salary Calculator to see full take-home pay after HRA and all deductions. Compare old vs new tax regime with our Income Tax Calculator. Planning 80C investments? Check our PPF Calculator for tax-free returns.
Frequently Asked Questions
What is HRA exemption under Section 10(13A)? ⌄
HRA exemption under Section 10(13A) allows salaried employees to reduce taxable income by the tax-free portion of House Rent Allowance. The exempt amount is the minimum of: actual HRA received, 50%/40% of basic salary (metro/non-metro), and actual rent paid minus 10% of basic salary.
Which cities are metro for HRA calculation? ⌄
Only four cities are classified as metro for HRA: Delhi, Mumbai, Kolkata, and Chennai. These get 50% of basic salary as the HRA limit. All other cities — including Bangalore, Hyderabad, Pune, Ahmedabad, Jaipur — are non-metro and use 40% of basic salary.
Can I claim HRA while paying rent to parents? ⌄
Yes, you can pay rent to parents and claim HRA exemption — but you need a proper rent agreement and your parents must declare the rent as income in their ITR. Paying rent to a spouse is generally not allowed by the Income Tax Department.
What if I pay zero rent or live in own house? ⌄
If you pay no rent, Condition 3 becomes zero (or negative), making your entire HRA fully taxable. You cannot claim HRA exemption without actually paying rent. If you own the house you live in, HRA is fully taxable regardless of amount.
Can I claim both HRA and home loan deduction? ⌄
Yes! If you live in a rented house in one city and have a home loan on a property in another city, you can claim both HRA exemption under Section 10(13A) and home loan interest deduction under Section 24. Even in the same city, dual claims are possible if you can justify why you rent instead of living in your owned property.
Is PAN of landlord required for HRA? ⌄
Yes, if your annual rent exceeds ₹1,00,000 (₹8,333/month), you must provide your landlord's PAN to claim HRA exemption. Your employer will require this for Form 16. If the landlord does not have a PAN, a declaration to that effect must be submitted.