House Rent Allowance (HRA) is part of many salaries. If you live in a rented home, part or all of it can be tax-free — but only under the old tax regime.
The HRA formula
The exempt amount is the lowest of:
- Actual HRA received from your employer
- Rent paid minus 10% of basic salary (plus DA)
- 50% of basic salary in Delhi, Mumbai, Kolkata or Chennai; 40% elsewhere
Worked example
Basic ₹50,000/month, HRA ₹20,000/month, rent ₹18,000/month, living in Mumbai:
| Rule | Yearly amount |
|---|---|
| Actual HRA received | ₹2,40,000 |
| Rent − 10% of basic | ₹1,56,000 |
| 50% of basic (metro) | ₹3,00,000 |
| Exempt HRA (lowest) | ₹1,56,000 |
| Taxable HRA | ₹84,000 |
Documents you need
- Monthly rent receipts signed by your landlord.
- Your landlord's PAN if annual rent exceeds ₹1 lakh.
- A rent agreement is good to have and some employers ask for it.
Common questions
- Can I pay rent to my parents? Yes, if they own the house and declare the rent as income. You can't claim HRA on rent paid to your spouse.
- What if I don't get HRA? Self-employed people and employees without HRA may be able to claim section 80GG instead (old regime).
- Is HRA allowed in the new regime? No. Check whether the old regime saves you more with the income tax calculator.
Work out your own exemption with the HRA calculator.