HRA Exemption & Rent Receipts: Complete Guide

By MavexTech · Updated 16 October 2026 · 10 min read

Your HRA exemption is the lowest of three amounts: the HRA your employer pays, the rent you pay minus 10% of your basic salary (plus DA), and 50% of that salary in Mumbai, Delhi, Kolkata or Chennai (40% elsewhere). You can claim it only under the old tax regime, and you need rent receipts, plus your landlord’s PAN if rent exceeds ₹1 lakh a year.

What HRA exemption is and who can claim it

House Rent Allowance (HRA) is a part of salary that many employers pay to help with housing costs. Under section 10(13A) of the Income-tax Act, 1961, read with rule 2A of the Income-tax Rules, part or all of this allowance can be exempt from tax if you actually pay rent for the home you live in.

You can claim the exemption only if all of these are true:

• You are a salaried employee and your salary structure includes an HRA component.
• You live in rented accommodation and actually pay rent for it.
• You do not own the house you live in (you cannot pay rent for your own home).
• You are filing under the old tax regime. HRA exemption is not available in the new tax regime, which is the default from FY 2023-24 onward.

That last point matters most. If you choose the new regime, all of your HRA is taxable, however much rent you pay. Whether giving up HRA is worth it depends on your other deductions; our guide on the new vs old tax regime walks through the comparison.

Self-employed people and salaried people whose salary has no HRA component cannot use section 10(13A), but they may be able to claim a smaller deduction under section 80GG, covered later in this guide.

The HRA exemption formula (least of three)

The exempt amount is the lowest of these three figures, worked out for the period you lived in rented accommodation during the year:

Whatever HRA is left after subtracting the exempt amount is added to your taxable salary.

What “salary” means here

For this formula, salary is not your CTC or gross pay. It is:

• Basic salary, plus
• Dearness allowance (DA), if the terms of employment treat it as part of salary for retirement benefits, plus
• Commission paid as a fixed percentage of turnover achieved by you.

For most private-sector employees there is no DA, so “salary” simply means basic pay. Bonus, special allowance and other allowances are not counted.

Metro vs non-metro

For FY 2025-26, only four cities get the 50% limit: Mumbai, Delhi, Kolkata and Chennai. Cities such as Bengaluru, Hyderabad, Pune and Ahmedabad are treated as non-metro for this rule, so the limit is 40% of salary there. Rules for later years come under the new Income-tax Act, 2025, so check the current city list on the Income Tax Department website when you file for those years.

Worked examples with real numbers

Example 1: employee in Pune

Basic salary ₹50,000 a month (₹6,00,000 a year), no DA, HRA ₹20,000 a month (₹2,40,000 a year), rent ₹18,000 a month (₹2,16,000 a year). Pune is non-metro, so the limit is 40%.

Here the rent test (b) is the binding limit. If this employee lived in Mumbai instead, limit (c) would rise to ₹3,00,000, but the exemption would still be ₹1,56,000, because the lowest figure does not change. Moving to a metro only helps when (c) is the smallest of the three.

Example 2: when metro status changes the answer

Basic salary ₹40,000 a month (₹4,80,000 a year), HRA ₹20,000 a month (₹2,40,000), rent ₹25,000 a month (₹3,00,000 a year).

With the same pay and rent, the Delhi employee gets ₹48,000 more exemption than the Bengaluru employee, because the salary limit (c) is the smallest figure in both cases.

How much tax does this save?

The saving equals the exempt HRA multiplied by your marginal tax rate under the old regime, plus 4% health and education cess. For the ₹1,56,000 exemption in Example 1:

• At the 30% slab: ₹1,56,000 × 31.2% = ₹48,672
• At the 20% slab: ₹1,56,000 × 20.8% = ₹32,448
• At the 5% slab: ₹1,56,000 × 5.2% = ₹8,112

Surcharge, the section 87A rebate and other deductions can change the final figure, so run your full numbers through a tax calculator before deciding on a regime.

Rent receipts: when you need them and what to include

Your employer gives the HRA exemption while deducting TDS from your salary, but only if you submit proof. Most employers ask for rent receipts, usually once a quarter or at the end of the financial year, along with Form 12BB, the standard declaration of deductions and exemptions.

When receipts and landlord PAN are needed

• Rent receipts: CBDT guidance lets employers accept the exemption without receipts when rent is up to ₹3,000 a month. Above that, expect to submit receipts. Many employers ask for them regardless of amount.
• Landlord’s PAN: required in Form 12BB if the rent you pay is more than ₹1,00,000 in the year (about ₹8,333 a month). If the landlord has no PAN, a declaration from the landlord to that effect is commonly accepted.
• Rental agreement: not always demanded by employers, but keep a copy. It is the strongest evidence if your claim is ever questioned.

What a valid rent receipt should show

1. Tenant’s name (exactly as on your PAN) and landlord’s name.
2. Full address of the rented property.
3. Rent amount, in figures and words.
4. The period covered, for example “April 2025” or “April to June 2025”.
5. Date and mode of payment (bank transfer, UPI, cheque or cash).
6. Landlord’s PAN, if annual rent is above ₹1,00,000.
7. Landlord’s signature. For cash payments above ₹5,000, a revenue stamp on the receipt is a common practice.

Pay rent through a bank transfer or UPI whenever you can. A bank trail matching each receipt is far more convincing than cash receipts alone.

TDS on rent above ₹50,000 a month

If you pay more than ₹50,000 a month as rent, section 194-IB requires you, as the tenant, to deduct TDS on the rent (2% from 1 October 2024; earlier 5%) and deposit it using Form 26QC. This applies even if you are not otherwise required to deduct TDS. Check the current rate on the Income Tax Department website before you deduct.

Special situations

Paying rent to your parents

You can claim HRA for rent paid to your parents if the arrangement is genuine: the house belongs to them, you actually transfer rent to them, and they show this rent as income in their own tax return. A rent agreement and regular bank transfers help. Paying rent to your spouse is much harder to defend and is best avoided.

You forgot to submit proofs to your employer

If your employer deducted extra TDS because you did not submit rent proofs in time, you can still claim the exemption while filing your income tax return under the old regime. Keep the receipts and agreement ready, because the return will show a different exempt amount from your Form 16.

You changed cities or rent mid-year

The formula is applied for each period separately. If you lived in Chennai for six months and Pune for six months, compute the three limits for each period with the salary, HRA and rent of that period, then add the two exempt amounts.

You own a house in another city

Owning a house in a different city does not stop you from claiming HRA for the rented home where you live and work. You cannot claim HRA for rent paid on a house you own.

No HRA in your salary: section 80GG

If you pay rent but receive no HRA (or you are self-employed), section 80GG allows a deduction under the old regime equal to the least of:

Example: adjusted total income ₹6,00,000, rent ₹1,20,000 a year. (a) ₹60,000; (b) ₹1,50,000; (c) ₹1,20,000 − ₹60,000 = ₹60,000. Deduction = ₹60,000. You must also file Form 10BA, and neither you, your spouse nor your minor child should own a house in the city where you live.

Mistakes that cost people their HRA claim

• Choosing the new regime and still expecting HRA. HRA is fully taxable in the new regime.
• Using gross salary in the formula. Use basic pay plus eligible DA only; using gross salary inflates limits (b) and (c).
• Treating Bengaluru, Hyderabad or Pune as a metro. For FY 2025-26 they use the 40% limit.
• Missing landlord PAN when rent crosses ₹1,00,000 a year.
• Receipts that do not match payments. If your bank statement shows ₹15,000 and the receipt shows ₹20,000, the claim is weak.
• Ignoring TDS on rent above ₹50,000 a month.

Frequently asked questions

This guide is general information, not tax advice. Rules described are for FY 2025-26; check incometax.gov.in or a tax professional for your situation.