What Is HRA and Who Gets It?
House Rent Allowance (HRA) is a component of your salary that your employer provides to help cover accommodation expenses. It is governed by Section 10(13A) of the Income Tax Act read with Rule 2A.
If your salary structure includes an HRA component and you pay rent for the accommodation you live in, a portion — sometimes all — of your HRA is exempt from income tax. This is one of the most valuable tax benefits available to salaried employees in India.
HRA is NOT available under the new tax regime. If you're on the new regime, your HRA is fully taxable and there is no exemption — you get the ₹75,000 standard deduction instead. This is one of the main reasons high-rent payers often prefer the old regime.
The HRA Exemption Formula — The 3-Condition Rule
Your tax-exempt HRA is the lowest of these three amounts:
Condition 1: Actual HRA received from employer
Condition 2: 50% of basic salary (metro) OR 40% of basic salary (non-metro)
Condition 3: Rent paid − 10% of basic salary
Exempt HRA = MINIMUM of Condition 1, 2, and 3
Condition 2: 50% of basic salary (metro) OR 40% of basic salary (non-metro)
Condition 3: Rent paid − 10% of basic salary
Exempt HRA = MINIMUM of Condition 1, 2, and 3
The remainder — HRA received minus exempt HRA — is taxable and added to your income.
Metro vs Non-Metro Cities for HRA
This changed recently — check which year applies to you. From FY2026-27 onward (under the Income-tax Rules, 2026, effective 1 April 2026), the metro list expanded from 4 cities to 8 cities. If you're still finalising your FY2025-26 return, the older 4-city rule applies to that year.
| City type | Cities | HRA % of basic (Condition 2) |
|---|---|---|
| Metro (FY2026-27 onward) | Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad | 50% |
| Metro (FY2025-26 and earlier) | Mumbai, Delhi, Kolkata, Chennai only | 50% |
| Non-metro | All other cities (Jaipur, Kochi, Chandigarh, etc.) — in every year | 40% |
⚠️ Bengaluru, Hyderabad, Pune and Ahmedabad only became metro cities for HRA purposes from FY2026-27. If you're calculating HRA for FY2025-26 or earlier, these four cities still use the 40% non-metro rate — using 50% for those years is incorrect. From FY2026-27 onward, use 50% for all eight cities.
Worked Examples — Metro and Non-Metro
Example 1: Jaipur (Non-Metro)
Monthly details:
- Basic salary: ₹40,000
- HRA received: ₹20,000
- Rent paid: ₹18,000
- City: Jaipur (non-metro — like most Indian cities outside the 8-city metro list)
| Condition | Calculation | Amount |
|---|---|---|
| Condition 1: Actual HRA | Given | ₹20,000 |
| Condition 2: 40% of basic | 40% × ₹40,000 | ₹16,000 |
| Condition 3: Rent − 10% basic | ₹18,000 − (10% × ₹40,000) | ₹14,000 |
| Exempt HRA (minimum) | min(₹20,000, ₹16,000, ₹14,000) | ₹14,000 |
| Taxable HRA | ₹20,000 − ₹14,000 | ₹6,000 |
Annual tax saving (at 20% tax slab): ₹14,000 × 12 × 20% = ₹33,600/year
Example 2: Mumbai (Metro)
Monthly details:
- Basic salary: ₹50,000
- HRA received: ₹25,000
- Rent paid: ₹30,000
- City: Mumbai (metro)
| Condition | Calculation | Amount |
|---|---|---|
| Condition 1: Actual HRA | Given | ₹25,000 |
| Condition 2: 50% of basic (metro) | 50% × ₹50,000 | ₹25,000 |
| Condition 3: Rent − 10% basic | ₹30,000 − (10% × ₹50,000) | ₹25,000 |
| Exempt HRA (minimum) | min(₹25,000, ₹25,000, ₹25,000) | ₹25,000 |
| Taxable HRA | ₹25,000 − ₹25,000 | ₹0 |
In this case, the entire HRA is tax-free — this happens when rent paid is high relative to HRA and basic.
HRA and the New Tax Regime
This is the most important decision point. Under the new tax regime (which is default from FY2026-27):
| Feature | Old Regime | New Regime |
|---|---|---|
| HRA exemption available? | ✓ Yes — under Section 10(13A) | ✗ No — not available |
| Standard deduction | ₹50,000 | ₹75,000 |
| Best for | High rent payers, metro cities | Low rent / no rent payers |
Quick decision rule: If your annual HRA exemption exceeds ₹1.25 lakh (the difference between the two standard deductions of ₹75,000 and ₹50,000), the old regime is likely better for you — even without any 80C investments. Use the Tax Regime Picker to get your exact personalised answer.
How to Claim HRA Exemption from HR
To reduce your monthly TDS (so you don't pay more tax and wait for a refund), submit documents to HR:
- Submit before February 15 — This is the effective deadline at most companies. HR uses this to recalculate TDS for the remaining months of the financial year.
- If you submit in March, only one month's TDS is adjusted — you'll get a smaller benefit immediately and claim the rest via ITR refund.
- Some companies have an online HR portal (Darwinbox, GreytHR, Keka) — upload directly there.
What Documents You Need
| Situation | Required documents |
|---|---|
| Annual rent ≤ ₹1,00,000 | Rent receipts (monthly or quarterly) with stamp and landlord signature |
| Annual rent > ₹1,00,000 | Rent receipts + landlord's PAN card copy (mandatory) |
| Paying rent to spouse | Not eligible — Income Tax disallows HRA exemption for rent paid to spouse |
| Paying rent to parents | Eligible — ensure parents declare it as rental income in their ITR |
Rent receipt format: Must include — amount paid, period (e.g., April 2024), property address, landlord name and signature, and a ₹1 revenue stamp for receipts above ₹5,000. Templates are widely available online. Your company's HR portal may also have a format.
Claiming HRA While Filing ITR
If you missed submitting receipts to HR and want to claim HRA exemption while filing your income tax return:
- In your ITR form (ITR-1 or ITR-2), go to the exemptions section under salary income
- Enter the HRA exemption amount calculated using the three-condition formula
- Keep rent receipts and landlord PAN safely — you don't submit them with ITR, but must produce them during scrutiny
- The refund of excess TDS deducted will be credited to your bank account after ITR processing
5 HRA Mistakes That Cost You Money Every Year
- Not declaring rent to HR — Most common. If you pay rent but don't submit receipts, your employer treats your entire HRA as taxable. You overpay TDS throughout the year and get a refund only after filing ITR in July.
- Using the wrong metro list for the year — Bengaluru, Hyderabad, Pune and Ahmedabad only became metro cities (50% rate) from FY2026-27. If you're calculating HRA for FY2025-26 or earlier, using 50% for these four cities is incorrect — they were non-metro (40%) for those years. Check which financial year you're calculating before picking a rate.
- Not getting landlord's PAN for rent above ₹1 lakh — Skipping this makes your claim invalid during scrutiny. If landlord refuses, document the refusal and seek legal advice.
- Paying rent to spouse and claiming HRA — Disallowed by IT Act. If challenged, the entire HRA becomes taxable plus interest and penalty.
- Claiming HRA under new tax regime — Not permitted. If you've switched to the new regime, HRA exemption doesn't apply. Claiming it is an error that will be rejected during ITR processing.
Frequently Asked Questions
Common questions about HRA exemption calculation in India.
What is the HRA exemption formula in India?
HRA exemption = minimum of these three amounts: (1) Actual HRA received from employer, (2) 50% of basic salary if you live in a metro city, or 40% in non-metro cities, (3) Rent paid minus 10% of basic salary. The metro list is 8 cities (Mumbai, Delhi, Chennai, Kolkata, Bengaluru, Hyderabad, Pune, Ahmedabad) from FY2026-27 onward, or 4 cities (Mumbai, Delhi, Chennai, Kolkata) for FY2025-26 and earlier. The lowest of the three amounts is your tax-exempt HRA.
Is HRA exemption available under the new tax regime?
No. HRA exemption under Section 10(13A) is NOT available under the new tax regime. It is only available under the old tax regime. This is one of the key reasons many employees with high rent prefer the old regime — the HRA exemption can save significant tax. Under the new regime, you get a flat ₹75,000 standard deduction instead.
Can I claim HRA exemption without rent receipts?
For HRA exemption while filing ITR, you do not need to submit rent receipts to the tax department. However, your employer requires rent receipts to reduce your monthly TDS. If you don't submit receipts to HR, TDS is deducted as if HRA is fully taxable, and you claim the refund when filing ITR. For rent above ₹1 lakh/year, your landlord's PAN is mandatory.
Can I claim HRA and home loan deduction simultaneously?
Yes, you can claim both HRA exemption and home loan interest deduction (Section 24) simultaneously, provided you have a genuine reason for not living in your own property — such as the property being in a different city, it being under construction, or rented out. Both claims must be genuine and you should be prepared to justify this during an IT scrutiny.
What are metro cities for HRA calculation in India?
From FY2026-27 onward, eight cities qualify as metro for HRA purposes: Mumbai, Delhi, Chennai, Kolkata, Bengaluru, Hyderabad, Pune and Ahmedabad — under the Income-tax Rules, 2026. For FY2025-26 and earlier years, only the original four (Mumbai, Delhi, Chennai, Kolkata) count as metro; Bengaluru, Hyderabad, Pune and Ahmedabad were non-metro (40%) for those years. All other cities remain non-metro (40%) in every year.