House Rent Allowance (HRA) exemption under Section 10(13A) is calculated as the minimum of three methods. This ensures you get the most beneficial tax treatment. The exemption depends on whether you live in a metro city (Mumbai, Delhi, Chennai, Kolkata — 50%) or non-metro city (40%).

How the calculation works

Exempt HRA = Minimum of:
1. Actual HRA Received
2. 50% of Basic Salary (Metro) / 40% of Basic Salary (Non-Metro)
3. Actual Rent Paid - 10% of Basic Salary

Taxable HRA = HRA Received - Exempt HRA

A quick example

Let us calculate HRA exemption for an employee in Mumbai:

Annual Basic Salary:₹6,00,000

HRA Received per Year:₹3,00,000

Annual Rent Paid:₹2,40,000 (₹20,000/month)

City Type:Metro (Mumbai)

Step by step

1.Method 1 — Actual HRA received: ₹3,00,000
2.Method 2 — 50% of basic (metro): 6,00,000 × 50% = ₹3,00,000
3.Method 3 — Rent paid - 10% of basic: 2,40,000 - 60,000 = ₹1,80,000
4.Exempt HRA = Minimum(3,00,000, 3,00,000, 1,80,000) = ₹1,80,000
5.Taxable HRA = 3,00,000 - 1,80,000 = ₹1,20,000

So the answer is: HRA Exemption = ₹1,80,000 | Taxable HRA = ₹1,20,000 | Tax Saved ≈ ₹37,000 (at 30% slab)

Frequently Asked Questions

Who can claim HRA exemption?

Salaried employees who receive HRA as part of their CTC and live in rented accommodation can claim HRA exemption under Section 10(13A).

What if I dont receive HRA?

If you don't receive HRA but pay rent, you can claim deduction under Section 80GG, subject to certain conditions.

Can I claim HRA while living with parents?

You cannot claim HRA if you own the house you live in. If living with parents, you can pay rent to them and claim HRA, provided they declare the rental income.

What documents are needed for HRA?

Rent receipts, rental agreement, and if rent exceeds ₹1 lakh/year, landlord's PAN is required.