HRA exemption under Section 10(13A).
HRA exemption
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Actual HRA
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Rent − 10% basic
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50%/40% basic
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Your breakdown
Updates live as you type| Of the three values | Amount |
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HRA is not fully exempt, and that catches people out
A lot of salaried employees assume that if their employer pays House Rent Allowance and they pay rent, the whole allowance is tax-free. It is not. Section 10(13A) exempts only a part of your HRA, computed by a specific formula, and the rest is added to your taxable salary. The exemption is the lowest of three figures, which is why a generous HRA component does not automatically mean a large exemption. Get one of the three inputs wrong and you either overpay tax or invite a notice.
Before anything else, the big condition: HRA exemption exists only in the old tax regime. The new regime, which became the default from AY 2024-25, does not allow it at all. So even if your salary structure shows a fat HRA and you pay rent diligently, opting for the new regime forfeits the exemption entirely. This calculator is therefore an old-regime tool.
The minimum-of-three formula
The exempt HRA is the lowest of these three amounts: the actual HRA you received from your employer; your rent paid minus 10 percent of your basic salary; and 50 percent of basic if you live in a metro, or 40 percent of basic if you do not. Whichever of these three is smallest becomes your exemption, and the balance of your HRA is taxed at your slab. The metro definition is narrow and statutory: only Mumbai, Delhi, Kolkata, and Chennai count as metros for this purpose. Bengaluru, Pune, Hyderabad, and every other city use the 40 percent figure, however expensive they have become.
A worked example: a Mumbai tenant
Take an annual basic salary of Rs 8,00,000, HRA received of Rs 3,00,000, rent paid of Rs 3,60,000, and a metro home in Mumbai. Work out all three legs.
Here the middle leg, rent minus 10 percent of basic, is the smallest, so Rs 2,80,000 is exempt and only Rs 20,000 of the HRA is taxed. Notice that the rent leg is usually the binding one for people whose rent is modest relative to salary. If this person paid higher rent, the exemption would rise until it hit the actual HRA or the 50 percent ceiling. Raising rent on paper to inflate the exemption is a tax-evasion trap, not a strategy.
Documents and the PAN rule
To claim HRA you need genuine rent receipts and, ideally, a rent agreement and proof of payment by bank transfer. The rule that trips people: if your annual rent exceeds Rs 1,00,000, you must report your landlord’s PAN to your employer. No PAN means the employer can refuse the exemption while processing salary, leaving you to claim it in your return and risk scrutiny. Paying rent in cash with handwritten receipts and no bank trail is exactly the pattern the tax department flags, so keep the paper trail clean.
Some real-world wrinkles
You can claim HRA even while paying rent to a parent, provided the arrangement is real, the parent genuinely owns the home, you actually transfer the rent, and the parent declares that rent as income. It is legitimate and common, but it must be substantive, not a paper fiction. You can also claim HRA and a home-loan deduction at the same time if, say, you rent in the city you work in while owning a house elsewhere, or your owned home is genuinely too far to commute from. And if you did not declare rent to your employer in time and no exemption shows on your Form 16, you can still claim it directly in your ITR as long as you hold the proof.
Can I claim HRA if my company does not pay an HRA component?
Not under Section 10(13A), that exemption needs an actual HRA in your salary. But if you are salaried without HRA, or self-employed, and you pay rent, you can claim a deduction under Section 80GG instead, capped at the lowest of Rs 5,000 a month, 25 percent of total income, or rent paid minus 10 percent of income. It is smaller, but it exists.
Is the 10 percent deducted from basic only, or basic plus DA?
It is 10 percent of salary for HRA purposes, which means basic plus dearness allowance if your DA forms part of retirement benefits, plus any commission that is a fixed percentage of turnover. For most private-sector employees with no DA, it is simply 10 percent of basic, which is what this calculator uses.