House Rent Allowance (HRA) is one of the most common and important salary components provided by employers to help employees meet their rental expenses. If employee lives in a rented house and receive HRA in his salary component, He may be eligible to claim tax exemption under the Income Tax Act, reducing your taxable income.
The exemption is available under Section 10(13A) of the Income Tax Act read with Rule 2A of the Income Tax Rules.
Now let us understand that who can claim the HRA.
- If you are leaving in Rented house then you can claim HRA
- You are Salaried employees
- HRA (House Rent Allowance is component of your Salary)
- HRA Exemption is allowed to those employee who has opted Old Tax Regime
Is PAN number of Landlord in necessary
If an employee pays rent to a landlord and claims House Rent Allowance (HRA) while filing the employer’s Q4 return, the details of the rent paid to the landlord must be reported if the total annual rent exceeds ₹1,00,000.
Therefore, the landlord’s PAN is mandatory if the total rent paid during the financial year is more than ₹1,00,000. If the PAN is not available, the employee should provide a valid declaration explaining the reason, as per the applicable Income Tax rules
Is HRA Exemption allowed for New Tax Regime
Employees have two options for income tax computation: they can choose either the New Tax Regime or the Old Tax Regime, depending on which is more beneficial for them.
However, if an employee wishes to claim House Rent Allowance (HRA) exemption, they must opt for the Old Tax Regime. HRA exemption is not available under the New Tax Regime.
What is Formula for HRA Exemption
There are three conditions for calculating the HRA exemption. Among these three amounts, the least amount is considered eligible for HRA exemption under the Income Tax Act.
The HRA exemption is calculated based on the least of the following three amounts:
- Actual HRA received from the employer.
- Rent paid minus 10% of Basic Salary (Basic Salary + Dearness Allowance, if it forms part of retirement benefits).
- 50% of Basic Salary if the employee resides in a metro city (Delhi, Mumbai, Kolkata, or Chennai), or 40% of Basic Salary for non-metro cities.
The lowest of the above three amounts is allowed as the HRA exemption under the Income Tax Act.
What document Required for HRA Exemption claim
Keep the following documents:
- Rent receipts
- Rent agreement
- Landlord PAN (if applicable)
- Proof of rent payment
- Employer HRA declaration
Can We claim HRA while living with Parents?
Yes,You can claim HRA if:
- Parents own the house.
- You actually pay rent.
- Parents declare rental income in their Income Tax Return.
- Proper rent receipts are maintained.
Can HRA and Home Loan be Claimed Together?
Yes, You may claim both if:
- Your own house is in another city.
- Your workplace is different.
- You live in rented accommodation due to work.
HRA Calculator
HRA Exemption Calculator
Calculation Result
Condition 1 (Actual HRA Received):
Condition 2 (Rent Paid – 10% Basic):
Condition 3 (% of Basic Salary):
HRA Exemption:
Taxable HRA:
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