What is HRA exemption under Section 10(13A)?
House Rent Allowance is a salary component, and part of it can be exempt from tax if you actually pay rent. The exemption is not the HRA on your payslip. It is the smallest of three figures, and which one wins depends on your salary, your rent and your city.
It is available only under the old tax regime. If you are on the new regime, HRA is fully taxable no matter how much rent you pay.
How HRA exemption is calculated
Three candidates are computed, and the exemption is whichever is lowest:
- The HRA you actually received in the year.
- Rent paid minus 10% of basic salary (basic plus DA, where DA counts for retirement benefits).
- 50% of basic salary if you live in a metro, 40% if you do not.
The third rule is where most surprises come from, and the second is why someone paying very low rent relative to their salary gets almost nothing: if your rent is under 10% of basic, that candidate goes to zero and so does your exemption.
Which cities count as metro for HRA?
Only four: Mumbai, Delhi, Kolkata and Chennai. That is the complete list.
Bengaluru, Hyderabad, Pune, Gurgaon, Noida and Ahmedabad are not metros for this purpose, however expensive their rents have become. The definition comes from the Income-tax Act and has not been updated for where India's salaries actually moved, which is the single most common reason a calculated exemption comes out lower than expected.
HRA calculation example
Monthly basic ₹50,000, HRA received ₹25,000, rent paid ₹30,000, living in Bengaluru:
| Candidate | Working | Annual |
|---|---|---|
| Actual HRA received | ₹25,000 × 12 | ₹3,00,000 |
| Rent − 10% of basic | (₹30,000 − ₹5,000) × 12 | ₹3,00,000 |
| 40% of basic (non-metro) | ₹20,000 × 12 | ₹2,40,000 |
The exemption is ₹2,40,000 — the smallest. The remaining ₹60,000 of HRA is taxable.
Move the same person to Mumbai and the third candidate becomes 50% of basic, or ₹3,00,000. All three are then ₹3,00,000 and the whole HRA is exempt. Same salary, same rent, ₹60,000 of difference.
Is landlord PAN required for HRA?
Only when your annual rent exceeds ₹1,00,000 — about ₹8,334 a month. Above that you must give your employer the landlord's name, address and PAN, and report it in your ITR.
Without the PAN, the employer can and usually will reject the exemption at source. If the landlord genuinely has no PAN, a signed declaration from them is the fallback, but expect it to be questioned.
Can I claim HRA for rent paid to parents?
Yes, and it is legal. It is also one of the most scrutinised claims in Indian tax, so it only survives if the arrangement is real:
- Your parent must actually own the property.
- Rent must move by bank transfer, monthly, not as a year-end lump sum.
- There must be a rent agreement.
- Your parent must declare that rent as income in their own return.
Paying rent to a spouse is treated far more sceptically, and paying rent for a house you yourself own does not work at all.
Can I claim HRA and a home loan together?
Yes, and it is more common than people assume. HRA exempts rent you pay for where you live; Section 24(b) deducts interest on a house you own. They cover different properties, so both can apply — someone working in one city while owning a home in another, or someone whose own flat is genuinely let out.
What does not work is claiming HRA for a house you live in and own. The exemption requires rent actually paid to someone else.
HRA exemption in the new tax regime
There is none. The new regime removed HRA along with 80C, 80D and home-loan interest, in exchange for lower slab rates and a larger standard deduction.
This matters when choosing a regime. A large HRA claim is one of the few deductions big enough to make the old regime worth keeping — someone renting in a metro on a high basic can be claiming ₹3–4 lakh of exemption, which is most of the way to the point where the old regime wins. Our old vs new comparison runs both on your actual numbers.
What if my employer does not pay HRA?
Then Section 10(13A) does not apply, but Section 80GG might. It allows a deduction for rent paid by someone who receives no HRA, capped at the least of ₹5,000 a month, 25% of total income, or rent minus 10% of total income.
It is much smaller than a typical HRA exemption, it also requires the old regime, and you cannot claim it if you, your spouse or your minor child own a house in the city where you work.