HRA Exemption
House Rent Allowance (HRA) Exemption
House Rent Allowance (HRA) is a common component of the salary package for salaried individuals in India. Income Tax laws allow for a partial or complete exemption of the HRA amount, helping you save on taxes. This exemption is available under Section 10(13A) of the Income Tax Act.
How to Calculate Exemption
The exempt HRA amount is the lowest of the following three values:
- Actual HRA received from employer.
- 50% of (Basic Salary + DA) for Metro cities*, or 40% for Non-Metro cities.
- Actual Rent Paid minus 10% of (Basic Salary + DA).
Example Calculation
Suppose you live in Mumbai (Metro):
- Basic Salary: ₹50,000
- HRA Received: ₹20,000
- Rent Paid: ₹15,000
Values:
1. Actual HRA: ₹20,000
2. 50% of Basic: ₹25,000
3. Rent - 10% Basic: ₹15,000 - ₹5,000 = ₹10,000
The lowest is ₹10,000. So only ₹10,000 is tax-free. The remaining ₹10,000 is taxable.
FAQ
Can I claim HRA if I live with parents?
Yes, if you actually pay rent to your parents and they show it as rental income in their tax returns. You cannot be a co-owner of the property.
Do I need a Rent Receipt?
Yes, submitting rent receipts to your employer is mandatory to claim HRA exemption. If rent exceeds ₹1 lakh per year, the landlord's PAN is also mandatory.