HRA Tax Exemption: How to Calculate & Claim in FY 2025-26

House Rent Allowance (HRA) is one of the most commonly claimed tax exemptions by salaried individuals in India. Under Section 10(13A) of the Income Tax Act, if you live in a rented accommodation and receive HRA as part of your salary, you can claim a significant tax deduction. This guide explains the formula, eligibility, documentation, and how to claim HRA in your ITR.

Important: HRA exemption is available only under the Old Tax Regime. If you opt for the New Tax Regime (default from FY 2023-24), you cannot claim HRA exemption.

Who Can Claim HRA Exemption?

You can claim HRA exemption if all three conditions are met:

1. You are a salaried employee and HRA is part of your salary structure
2. You live in a rented accommodation and actually pay rent
3. You have opted for the Old Tax Regime

Self-employed individuals cannot claim HRA under Section 10(13A), but they can claim rent deduction under Section 80GG (covered below).

HRA Exemption Calculation Formula

The HRA exemption is the minimum of these three amounts:

Metro vs Non-Metro Cities

• Metro cities (50% rule): Delhi, Mumbai, Kolkata, Chennai
• Non-metro cities (40% rule): All other cities including Bengaluru, Hyderabad, Pune, etc.

Note: "Salary" for HRA calculation means Basic Pay + Dearness Allowance (DA) only. Other components like special allowance are not included.

Example Calculation

Scenario: Ravi works in Bengaluru (non-metro). His annual details:

• Basic Salary: ₹6,00,000
• DA: ₹0
• HRA Received: ₹3,00,000
• Rent Paid: ₹2,40,000 (₹20,000/month)

HRA Exemption = ₹1,80,000 (minimum of the three)

Ravi pays tax only on ₹3,00,000 − ₹1,80,000 = ₹1,20,000 of HRA.

Documents Required for HRA Claim

Rent Below ₹1,00,000 Per Year

• Rent receipts with revenue stamp
• Declaration of rent payment

Rent ₹1,00,000 or Above Per Year

• Rent receipts with revenue stamp
• Landlord's PAN number (mandatory)
• Rental agreement (recommended)

Rent Paid to Family Members

• You can claim HRA if paying rent to parents (not spouse)
• Ensure proper rent receipts and bank transfer records
• The family member must declare rental income in their ITR

How to Claim HRA in Your ITR

Step 1: Collect Documents

Gather rent receipts, rental agreement, and landlord PAN (if applicable).

Step 2: Submit to Employer

Submit rent receipts and landlord details to your employer for TDS adjustment. This is typically done at the start of the financial year or during the investment declaration window.

Step 3: Verify Form 16

Check Part B of your Form 16 — the HRA exemption should reflect under "Allowances exempt under Section 10."

Step 4: File ITR

When filing your Income Tax Return:

1. Go to Income Tax e-Filing portal
2. In the ITR form, navigate to Schedule S (Salary Income)
3. Under "Allowances exempt under Section 10," enter the HRA exemption amount
4. Ensure you select the Old Tax Regime

Form 10BA: For Section 80GG (Self-Employed / No HRA)

If you are self-employed or your employer does not pay HRA, you can still claim rent deduction under Section 80GG:

Eligibility for Section 80GG

• You, your spouse, or minor child should not own a house at the place of work
• You should not be claiming HRA from any employer
• You must file Form 10BA (declaration of rent payment)

Section 80GG Deduction Amount

Minimum of:

• ₹5,000 per month (₹60,000 per year)
• 25% of total income
• Rent paid minus 10% of total income

How to File Form 10BA

1. Log in to the Income Tax e-Filing portal
2. Go to e-File → Income Tax Forms → Form 10BA
3. Fill in rent payment details, landlord name, address, and PAN
4. Submit with digital signature or EVC

Important Tips

1. Always pay rent via bank transfer — cash payments above ₹50,000/month are harder to prove
2. Get rent receipts every month — even if your landlord resists, you need these for proof
3. Landlord PAN is mandatory if annual rent exceeds ₹1,00,000 — get it at the start of your tenancy
4. HRA exemption cannot exceed actual HRA received — if your rent is very high but HRA component is low, the benefit is capped
5. Keep rental agreement registered if possible — it strengthens your claim during scrutiny

Common Mistakes to Avoid

• Claiming HRA under New Tax Regime — not allowed; you must opt for Old Regime
• Not collecting landlord PAN for rent above ₹1 lakh — employer may not process the exemption
• Paying rent to spouse — not eligible for HRA exemption
• Fake rent receipts — income tax department cross-verifies; penalties can be severe

Frequently Asked Questions

Can I claim HRA if I live in my own house?

No. HRA exemption requires that you live in a rented accommodation and actually pay rent. If you own the house you live in, you cannot claim HRA.

Can I claim both HRA and home loan benefits?

Yes, if you have a home loan for a property in a different city (say your hometown) and pay rent where you work, you can claim both HRA exemption and home loan deductions under Section 80C (principal) and Section 24(b) (interest).

Is HRA fully tax-free?

No. Only the exempt portion (calculated using the formula above) is tax-free. The remaining HRA is taxable as salary income.

What if my employer doesn't give HRA?

You can claim deduction under Section 80GG by filing Form 10BA. See the section above for details.

Can I claim HRA for rent paid to my parents?

Yes, you can pay rent to your parents and claim HRA exemption, provided the rent is genuine, receipts are maintained, and your parents declare the rental income in their ITR.

Is there a maximum limit for HRA exemption?

There is no fixed upper limit, but the exemption is capped by the formula (minimum of 3 amounts). In practice, it cannot exceed the actual HRA received from the employer.

What happens if I don't submit rent receipts to my employer?

Your employer will not consider HRA exemption while deducting TDS. You can still claim it while filing your ITR, but you must have all supporting documents.

This guide is for informational purposes only and is not affiliated with the Income Tax Department of India. Verify all details on the official Income Tax portal. Tax laws may change — consult a qualified CA for personalized advice.