What is the HRA exemption?
House Rent Allowance (HRA) is a component of your salary. Under Section 10(13A) of the Income Tax Act, you can claim a portion of it as tax-exempt — meaning it is not added to your taxable income — provided you actually pay rent for residential accommodation.
The exemption is available only under the old tax regime. If you have opted for the new tax regime (which has no deductions), HRA exemption does not apply.
Important: This article is general information, not tax advice. Your actual exemption depends on your salary structure, city, tax regime, employer rules, and current law. Verify with your HR department, a CA, or the Income Tax Department before filing.
The HRA exemption formula
The exempt amount is the lowest of these three values. Whatever is smallest becomes your tax-exempt HRA for that month.
(a) Actual HRA received from employer
(b) 50% of basic salary [metro city]
40% of basic salary [non-metro city]
(c) Actual rent paid − 10% of basic salary
Taxable HRA = Actual HRA received − Exempt HRA
Basic salary for this calculation means Basic + Dearness Allowance (DA). Do not include HRA, special allowance, or any other pay components.
Metro cities for HRA purposes (50% limit) — updated from April 1, 2026: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad. Budget 2026 expanded the metro list from 4 to 8 cities. All other cities use the 40% limit.
Worked example 1 — Metro city (Delhi)
Rahul works in Delhi. His monthly figures:
| Basic salary | ₹50,000/month |
|---|---|
| HRA received | ₹20,000/month |
| Actual rent paid | ₹18,000/month |
Step 1 — calculate all three limits
| Limit | Calculation | Amount |
|---|---|---|
| (a) Actual HRA received | — | ₹20,000 |
| (b) 50% of basic (metro) | 50% × ₹50,000 | ₹25,000 |
| (c) Rent paid − 10% of basic | ₹18,000 − ₹5,000 | ₹13,000 |
| Exempt HRA (lowest) | ₹13,000 | |
Result
Exempt HRA = ₹13,000/month. Taxable HRA = ₹20,000 − ₹13,000 = ₹7,000/month added back to salary income.
Worked example 2 — Non-metro city (Jaipur)
Priya works in Jaipur (non-metro — 40% limit applies). Her monthly figures:
| Basic salary | ₹40,000/month |
|---|---|
| HRA received | ₹14,000/month |
| Actual rent paid | ₹12,000/month |
Step 1 — calculate all three limits
| Limit | Calculation | Amount |
|---|---|---|
| (a) Actual HRA received | — | ₹14,000 |
| (b) 40% of basic (non-metro) | 40% × ₹40,000 | ₹16,000 |
| (c) Rent paid − 10% of basic | ₹12,000 − ₹4,000 | ₹8,000 |
| Exempt HRA (lowest) | ₹8,000 | |
Result
Exempt HRA = ₹8,000/month. Taxable HRA = ₹14,000 − ₹8,000 = ₹6,000/month added back to salary income.
Annual calculation
The formula above is per month. For annual ITR filing, apply it to each month separately if your salary, HRA, or rent changed during the year, then add the monthly exempt amounts to get your annual figure.
If nothing changed all year, multiply the monthly exempt amount by 12.
When landlord PAN is mandatory
If your annual rent exceeds ₹1,00,000 (monthly rent above ₹8,333), you must provide your landlord's PAN to your employer when submitting Form 12BB. If the landlord does not have a PAN, they must provide a written declaration stating this.
Skipping this step means your employer will not apply the HRA exemption during TDS deduction. You can still claim it when filing ITR, but it requires more paperwork and may attract scrutiny.
Documents to keep ready
- Rent receipts for every month — must include tenant name, landlord name, property address, rent amount, period, and landlord signature
- Rent agreement — recommended; sometimes required for higher rent amounts
- Landlord PAN — mandatory when annual rent exceeds ₹1,00,000
- Payment proof — bank transfer records or UPI screenshots for every month's rent
Common mistakes that get HRA claims rejected
Paying rent to a spouse or minor child. The Income Tax department does not allow HRA exemption for rent paid to a spouse or minor child — the transaction is not treated as genuine.
Paying rent to a family member without disclosing the relationship. From April 1, 2026, the declaration form requires you to disclose when your landlord is a family member (parent, sibling, etc.). Omitting this is now a compliance gap, even though rent paid to parents with a genuine tenancy remains allowed.
Missing receipts for some months. The exemption applies per month. If you skip months, those months lose their exemption. Generate receipts for the entire period you are claiming.
Incorrect receipt format. Receipts that lack landlord PAN (when required) or have no signature are often rejected by HR before they even reach the tax department.
Claiming HRA under the new tax regime. This is an immediate disqualification. HRA exemption is only available under the old regime.
Rent paid in cash above ₹5,000/month without a revenue stamp. A revenue stamp across the landlord's signature is required when cash rent exceeds ₹5,000 per payment.
Generate HRA rent receipts on Android
Once you have the exemption figure, the next step is producing valid receipts for HR or ITR records. mMoney generates IT-compliant HRA rent receipt PDFs on your Android phone — no account required, no data uploaded. Fill in tenant name, landlord name, PAN, address, rent amount, and period. The PDF is generated locally and ready to share in under a minute.
Read the HRA rent receipt generator guide for the full step-by-step workflow.
Sources and rule references
- Income Tax Department: Rule 2A limits for Section 10(13A)
- ClearTax: HRA exemption explainer
- ClearTax: landlord PAN and HRA
- JM Financial: HRA new rules from April 1, 2026 (metro city expansion)
- Angel One: New HRA rules from April 1, 2026
FAQ
What is the HRA exemption formula for 2026–27?
The exempt amount is the lowest of: (a) actual HRA received, (b) 50% of basic for metro cities or 40% for non-metro cities, and (c) actual rent paid minus 10% of basic salary. The rest is taxable.
Which cities qualify as metro for HRA?
From April 1, 2026, eight cities qualify for the 50% limit: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad. All other cities use 40%.
Is HRA exemption available under the new tax regime?
No. HRA exemption under Section 10(13A) is only available under the old tax regime.
When is landlord PAN mandatory?
When annual rent exceeds ₹1,00,000 (monthly rent above ₹8,333). If the landlord has no PAN, a written declaration is required instead.
Can I claim HRA if I pay rent to a family member?
Not to a spouse or minor child. Rent paid to parents is generally allowed if genuine tenancy can be demonstrated, but consult a CA for your specific situation.
Found a mistake or outdated figure? Tax rules change every budget. If something here is wrong or no longer accurate, email contact@trei.dev with the correction and a source. We review and update within a few days.