HRA Exemption: How to Calculate It, Rent Receipts, Metro Rules and Claiming From Parents

House Rent Allowance (HRA) is a part of the salary that many employers pay to help with rent. A portion of it can be exempt from tax under section 10(13A), but only under the old tax regime, and only if you actually pay rent. Getting the calculation and the paperwork right can save thousands of rupees in tax each year.

Who can claim

• Salaried people who receive HRA as part of the salary and pay rent for a house they live in.
• Under the old regime only. The new regime does not allow the HRA exemption.
• The exemption applies to rent paid, not to a house you own and live in.

The three-limit rule

The exempt HRA is the lowest of these three amounts:

1. The actual HRA you receive.
2. Rent paid minus 10% of your basic salary (plus dearness allowance if it forms part of retirement benefits).
3. 50% of basic salary if you live in a metro city, or 40% in other cities. At present, Delhi, Mumbai, Kolkata and Chennai are treated as metros for this purpose, and the list can change, so check current law.

Worked example

If the rent were ₹20,000 instead, limit 2 would be ₹15,000, so the exempt HRA would be ₹15,000 a month and the other ₹10,000 would be taxable. Calculate yours in the HRA calculator, and see the effect on take-home pay in the in-hand salary calculator.

Documents and rules

• Rent receipts: keep monthly receipts or a rent agreement and bank transfer proof. Employers usually ask for them when you submit your investment declaration.
• Landlord's PAN: required if annual rent is above ₹1,00,000. If the landlord has no PAN, a declaration is needed.
• Pay rent through the bank or UPI so there is a trail. Cash payments are risky if questioned by the tax department.
• Rent must be genuine. The landlord must declare it as income.

Paying rent to parents

You can pay rent to your parents and claim HRA, provided the arrangement is genuine: they own the house, you actually pay rent by bank transfer, they declare it as income in their tax return, and you live there. If your parents' total income is low, the tax cost to them may be small. Sham arrangements are a common reason for notices. Do not do this just on paper.

No HRA component in salary?

If your salary has no HRA but you pay rent, you may claim a deduction under section 80GG, within limits and conditions, such as not owning a house in the same city. The limit is the lowest of ₹5,000 a month, 25% of adjusted total income, or rent paid minus 10% of adjusted total income.

Home loan and HRA together

You can claim HRA on rent paid in the city where you work and a home loan deduction on a house in another city, within conditions. See home loan tax benefits. Compare regimes with the tax slab comparison.

Common mistakes

• Claiming HRA under the new regime.
• Forgetting the landlord's PAN above the limit.
• Using the wrong city category.
• Not updating the claim when you move or change rent.
• Claiming more than the rent you actually paid.

Rules and limits can change with the Budget. Check the current provisions or consult a chartered accountant.

Filing it correctly in practice

Submit your rent details to your employer at the start of the year as a declaration and the proofs near the end. If you did not claim HRA through your employer, you can still claim the exemption when you file your income tax return, provided you have proof, though the claim is made in the return and you must pay tax on any taxable HRA component. If you changed cities or landlords during the year, calculate each period separately. Keep a simple sheet listing month, rent paid, payment method and receipt number, and update it monthly so you are not scrambling in March.

Use the old-vs-new comparison each year, as your rent, salary and deductions change.

Quick scenarios

• You live in a non-metro city: the third limit is 40% of basic, so with a ₹40,000 basic it is ₹16,000, which may cap the exemption even if your rent is higher.
• You change jobs mid-year: each employer calculates for their period, and you reconcile everything in your return.
• Your rent is lower than 10% of basic: the second limit becomes zero, so no exemption applies.
• You live with parents and pay nothing: there is no exemption, and HRA is fully taxable.

Frequently asked questions

Can I claim HRA in the new tax regime?

No. HRA exemption is available only under the old regime.

Do I need the landlord's PAN?

Yes if annual rent exceeds ₹1 lakh.

Can I pay rent to my parents?

Yes, if it is genuine, paid by bank transfer and shown as income by them.

What if my salary has no HRA?

You may be able to claim a limited deduction under section 80GG.

Which cities count as metros for HRA?

Currently Delhi, Mumbai, Kolkata and Chennai. Check for updates.

Do I need rent receipts?

Yes, along with proof of payment.

Last reviewed 8 November 2026. Rates, limits and rules change, so confirm figures with the official source before you act.