What is HRA?
House Rent Allowance, or HRA, is a salary component paid by an employer to help an employee meet rental accommodation expenses. If you receive HRA and pay rent, a portion of HRA may be exempt from tax under Section 10(13A), subject to prescribed conditions.
HRA Exemption Formula
| Calculation Component | Meaning | Used in Formula |
|---|---|---|
| Actual HRA Received | Total HRA received from your employer for the eligible period. | Full actual HRA amount. |
| Rent Paid Minus 10% of Salary | Annual rent paid reduced by 10% of salary. | Rent paid − 10% of salary. |
| Salary Percentage Limit | 50% of salary for metro cities and 40% for non-metro cities. | 50% or 40% of salary. |
Who Can Claim HRA Exemption?
- Salaried employees who receive HRA as part of salary.
- Employees who actually pay rent for residential accommodation.
- Employees who do not live in their own house for which HRA is claimed.
- Employees who maintain rent receipts, rental agreement and landlord details where required.
- Employees choosing the old tax regime, subject to applicable rules.
Documents Generally Required
- Rent receipts for the months claimed.
- Rental agreement or lease agreement.
- Landlord PAN where annual rent exceeds the applicable reporting threshold.
- Salary slip showing HRA component.
- Employer declaration or proof submission acknowledgement, if applicable.
Important HRA Notes
For HRA calculation, salary generally means basic salary plus dearness allowance if it forms part of retirement benefits, and commission based on turnover where applicable. HRA exemption is available only for the period during which rented accommodation is occupied and rent is actually paid.