House Rent Allowance (HRA)
HRA refers to a component of salary provided by employers to assist with rental housing expenses. Under Section 10(13A) of the Income Tax Act, the HRA received may qualify for tax exemption, subject to conditions and limits prescribed by Rule 2A.
Eligibility
- •The individual is a salaried employee
- •The individual actually pays rent for residential accommodation
- •The accommodation is not owned by the individual or their spouse
Exemption Calculation
The exempt HRA is the lowest of:
- •Actual HRA received from employer
- •Rent paid minus 10% of salary (Basic + DA)
- •50% of salary for metro cities (Mumbai, Delhi, Kolkata, Chennai); 40% for non-metro
The amount exceeding the exemption limit is added to taxable income.
Documentation
- •Rent receipts from landlord (for rent above ₹3,000/month)
- •Landlord's PAN is mandatory when annual rent exceeds ₹1,00,000
- •Rental agreement as supporting documentation
HRA Under New Tax Regime
Under the new (default) tax regime, HRA exemption is not available. It is available only under the old tax regime. Employees must evaluate whether combined benefits of HRA and other deductions outweigh the lower slab rates.
Self-Employed Individuals
Those not in salaried employment cannot claim 10(13A) exemption but may claim deductions under Section 80GG, subject to different conditions (capped at ₹5,000/month or 25% of total income, whichever is lower).