HRA Exemption India: Calculate Your Tax-Free Rent Allowance
HRA (House Rent Allowance) exemption is one of the most valuable tax-saving tools for salaried Indians living in rented homes, and is available only under the old tax regime. The exempt amount is the minimum of: actual HRA received, rent paid minus 10% of basic salary, or 50% of basic salary (metro cities: Delhi, Mumbai, Chennai, Kolkata) or 40% (non-metro). For example, if your basic is ₹50,000/month, HRA received is ₹20,000, and rent paid is ₹22,000, your monthly exempt HRA is ₹17,000. Those who pay rent but do not receive HRA can claim up to ₹5,000/month under Section 80GG.
Frequently asked questions
Quick answer
What is the HRA exemption formula in India?
The exempt HRA is the lowest of three amounts: (1) actual HRA received from employer, (2) actual rent paid minus 10% of basic salary, (3) 50% of basic salary if you live in Delhi, Mumbai, Chennai, or Kolkata, or 40% for other cities. The remaining HRA above this exempt amount is fully taxable.
What is the HRA exemption formula in India?
The exempt HRA is the lowest of three amounts: (1) actual HRA received from employer, (2) actual rent paid minus 10% of basic salary, (3) 50% of basic salary if you live in Delhi, Mumbai, Chennai, or Kolkata, or 40% for other cities. The remaining HRA above this exempt amount is fully taxable.
Do I need to submit rent receipts to claim HRA exemption?
Your employer requires rent receipts to process HRA exemption in Form 16, especially if annual rent exceeds ₹1 lakh — in that case the landlord's PAN is also mandatory. Even if your employer does not collect them, keep receipts and a rent agreement as the Income Tax Department can ask for proof during scrutiny.
Can I claim HRA exemption if I pay rent to my parents?
Yes, you can pay rent to parents and claim HRA exemption — this is a fully legal arrangement. However, your parents must declare the rental income in their ITR, and the arrangement should be genuine with a proper rent agreement and bank transfers (avoid cash).
What is Section 80GG and who can claim it?
Section 80GG is for individuals who pay rent but do not receive HRA from their employer — typically self-employed professionals or employees whose salary structure has no HRA component. The deduction is the lowest of: ₹5,000/month, 25% of total income, or rent paid minus 10% of total income. You cannot claim 80GG if your spouse or minor child owns a house in the city you work in.