What Is HRA Exemption Under Section 10(13A)?
HRA exemption under Section 10(13A) of the Income Tax Act allows salaried employees living in rented accommodation to reduce their taxable income by the least of three amounts: actual HRA received, rent paid minus 10 per cent of basic salary, or 50 per cent (metro) or 40 per cent (non-metro) of basic salary.
The exemption is calculated monthly and applies only if you actually live in rented accommodation and pay rent. The amount that remains after the exemption (taxable HRA) is added to your gross salary and taxed at your applicable slab rate. For FY 2026-27, salaried employees opting for the old tax regime can claim this benefit.
As per SEBI and Income Tax Department guidelines, proper documentation including rent receipts and landlord PAN is essential to claim HRA exemption during tax filing.
HRA Exemption Formula
HRA Exemption = Minimum of (A, B, C)| Component | Formula | Notes |
|---|---|---|
| A | Actual HRA received from employer | The HRA amount in your salary slip |
| B | Rent paid minus 10 per cent of basic salary | Only the excess rent over 10% of basic qualifies |
| C (Metro) | 50 per cent of basic salary | Delhi, Mumbai, Chennai, Kolkata |
| C (Non-Metro) | 40 per cent of basic salary | All other Indian cities |
Worked example: Basic salary Rs 50,000 per month, HRA received Rs 20,000, rent paid Rs 18,000 in a metro city. A = Rs 20,000. B = Rs 18,000 minus Rs 5,000 (10% of basic) = Rs 13,000. C = 50% of Rs 50,000 = Rs 25,000. Exemption = min(Rs 20,000, Rs 13,000, Rs 25,000) = Rs 13,000 per month. Taxable HRA = Rs 20,000 minus Rs 13,000 = Rs 7,000.
Metro vs Non-Metro HRA Exemption
The city classification matters because the third component of the HRA formula changes. Four cities are classified as metro for HRA purposes: Delhi, Mumbai, Chennai, and Kolkata. For these cities, the ceiling is 50 per cent of basic salary. For all other Indian cities and towns, the ceiling is 40 per cent of basic salary.
If you live in a metro city but work for a company headquartered elsewhere, your HRA ceiling depends on the city where you actually reside and pay rent, not where your employer is based. Bangalore, Hyderabad, Pune, and Ahmedabad are all classified as non-metro for HRA exemption, even though they are major metropolitan areas.
| City Type | Cities Included | HRA Ceiling (% of Basic) |
|---|---|---|
| Metro | Delhi, Mumbai, Chennai, Kolkata | 50% |
| Non-Metro | Bangalore, Hyderabad, Pune, Ahmedabad, and all others | 40% |
HRA Calculation Example: Metro vs Non-Metro
Consider an employee with basic salary of Rs 60,000 per month and HRA of Rs 25,000 per month, paying rent of Rs 22,000 per month.
| Component | Metro City | Non-Metro City |
|---|---|---|
| Actual HRA Received | Rs 25,000 | Rs 25,000 |
| Rent minus 10% of Basic | Rs 22,000 minus Rs 6,000 = Rs 16,000 | Rs 22,000 minus Rs 6,000 = Rs 16,000 |
| Ceiling (% of Basic) | 50% = Rs 30,000 | 40% = Rs 24,000 |
| HRA Exemption | Rs 16,000 (lowest of the three) | Rs 16,000 (lowest of the three) |
| Taxable HRA | Rs 9,000 | Rs 9,000 |
In this example, the result is the same because the rent minus 10 per cent of basic (Rs 16,000) is the lowest in both cases. The metro ceiling only matters when rent is high relative to basic salary. Use the Old vs New Tax Regime Calculator to see whether opting for the old regime to claim HRA is worthwhile for your situation.
Rent Receipts and Landlord PAN Requirements
To claim HRA exemption, you need proper documentation. If your annual rent is Rs 1,00,000 or less, you need rent receipts showing the landlord name, address, amount, and period of rent. If the annual rent exceeds Rs 1,00,000, you must provide the landlord PAN in addition to rent receipts. The landlord must also declare the rental income in their income tax return.
Without the landlord PAN, your employer may deduct TDS at a higher rate on the HRA component, and the income tax department may disallow the HRA exemption if the PAN requirement is not met. It is advisable to obtain the landlord PAN at the start of the tenancy to avoid last-minute issues during tax filing.
HRA Under the Old Tax Regime
HRA exemption under Section 10(13A) is available only under the old tax regime. The new tax regime, which has been the default since FY 2023-24, does not allow this exemption. If you want to claim HRA benefit, you must explicitly opt for the old regime when filing your ITR.
For salaried employees with significant HRA components, the old regime often results in lower total tax despite the higher slab rates, because the HRA exemption can reduce taxable income by thousands per month. This is especially true for employees in metro cities paying high rent relative to their basic salary.
HRA vs Section 80GG: What Is the Difference?
Section 80GG is a deduction available to individuals who live in rented accommodation but do not receive HRA from their employer. This applies to self-employed professionals, freelancers, and employees whose salary structure does not include an HRA component. The deduction under Section 80GG is limited to the minimum of: rent paid minus 10 per cent of total income, Rs 5,000 per month, or 25 per cent of total income.
The key difference is that HRA exemption under Section 10(13A) is available only to salaried employees who receive HRA, while Section 80GG is available to any individual paying rent regardless of whether they receive HRA. The HRA exemption is also more generous because it is based on actual HRA and basic salary, with no upper cap of Rs 5,000 per month.
HRA for NRI Employees
NRI employees earning salary income in India are eligible to claim HRA exemption under Section 10(13A) if they satisfy the conditions: they receive HRA as part of their salary, live in rented accommodation in India, and actually pay rent. The same calculation rules apply with metro and non-metro classifications.
NRIs should be aware that if they claim HRA exemption under the old regime, they forego the lower tax rates of the new regime. Since NRIs often have different income compositions, it is important to compare both regimes before deciding. The multi-currency selector in this calculator converts amounts to your preferred currency for easier understanding.
Common HRA Claim Mistakes
How to Use This HRA Calculator
- Enter basic salary: enter your monthly basic salary as shown in your salary slip. Basic salary is the foundation for the HRA calculation.
- Enter HRA and rent: enter the monthly HRA amount your employer pays and the actual monthly rent you pay for your accommodation.
- Select city type: click More settings to choose between metro (Delhi, Mumbai, Chennai, Kolkata) or non-metro. The calculator adjusts the ceiling automatically.
- See the breakdown: the result panel shows the three components of the formula, the exempt amount, taxable HRA, and annual tax saving estimate.
Click any value to type a precise number. Use the currency selector to view amounts in your preferred currency. The annual tax saving shown is an estimate based on your marginal tax rate.
Frequently Asked Questions
Disclaimer: All calculations on this page are indicative only. HRA exemption depends on your actual salary structure, rent paid, city classification, and compliance with documentation requirements under the Income Tax Act. This calculator is for educational and planning purposes only and does not constitute financial advice. Consult a SEBI-registered investment adviser or a qualified chartered accountant for personalised tax planning.