House Rent Allowance (HRA) Exemption Guide for AY 2026-27

HRA (House Rent Allowance) exemption is a tax benefit under Section 10(13A) of the Income Tax Act that allows salaried employees to claim tax exemption on the rent allowance received from their employer. The exemption is calculated as the least of: (a) Actual HRA received, (b) 50% of salary (for metro cities) or 40% (for non-metro), or (c) Rent paid minus 10% of salary.

HRA exemption is calculated as the least of three amounts: 1) Actual HRA received from employer, 2) 50% of salary (for metro cities) or 40% (for non-metro cities), and 3) Rent paid minus 10% of salary. The term 'salary' includes basic pay, dearness allowance, and any commission received. For example, if your HRA is ₹15,000/month, rent is ₹25,000/month, and salary (basic+DA) is ₹60,000/month in Mumbai, your annual exemption would be ₹1,80,000.

For HRA purposes, metro cities include Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, and Pune. Employees living in these cities can claim HRA exemption up to 50% of their salary, while those in non-metro cities can claim up to 40%. The classification may vary slightly based on government notifications, but these are the primary metro cities.

To claim HRA exemption, you need: 1) Rent receipts with required details (landlord name, address, tenant name, rent amount, period, PAN if rent exceeds Rs 1 lakh), 2) Rent agreement (if available), 3) Landlord's PAN (mandatory if annual rent exceeds Rs 1 lakh), and 4) Form 12BB for claiming HRA from employer. Keep all documents safe and submit them to your employer for TDS adjustment.

A valid rent receipt for HRA should contain: landlord's name and address, tenant's name, property address, rent amount (monthly and total), period of rent, PAN of landlord (if rent exceeds Rs 1 lakh per year), date of payment, landlord's signature, and receipt number. For digital payments, screenshots of payment transactions can also serve as evidence. If paying rent above Rs 10,000 per month, payment must be through bank transfer or UPI.

Generally, HRA exemption is available only if you are paying rent for a house that you are occupying for your employment. However, if you own a house but live in a different city for employment purposes and pay rent for accommodation at your workplace, you may be eligible to claim HRA exemption. The key factor is that you should not own a house at your place of residence.

Section 80GG allows deduction for rent paid when HRA is not part of salary. This is applicable for self-employed individuals or salaried employees not receiving HRA from their employer. The deduction is the least of: rent paid minus 10% of total income, Rs 5,000 per month, or 25% of adjusted total income. Form 10BA is mandatory to claim this deduction.

Yes, you can claim HRA exemption directly while filing your Income Tax Return. Even if you didn't claim HRA exemption through your employer (Form 12BB), you can claim it in your ITR by providing rent receipts and other supporting documents. However, it is recommended to claim through employer to avoid TDS deductions on HRA portion.

If your annual rent exceeds Rs 1 lakh, providing landlord's PAN is mandatory under income tax rules. This is to ensure tax compliance and to enable the department to track rental income reported by landlords. Without landlord's PAN, your HRA exemption claim may be denied.

Yes, you can claim HRA exemption for the period during which you actually paid rent. If you started paying rent from a particular month, claim HRA only for that period. Keep rent receipts for all months you've paid rent and calculate exemption accordingly.