Calculate your HRA exemption under Sec 10(13A) - the minimum of the three statutory conditions - for metro and non-metro cities.
HRA exemption available only to salaried employees who actually pay rent and live in a rented accommodation. Not available in new tax regime.
Rent receipts required if annual rent exceeds ₹1 lakh. Landlord's PAN mandatory if annual rent exceeds ₹1 lakh for TDS purposes.
You can pay rent to parents and claim HRA. Ensure rent agreement exists and parents declare it as income in their ITR for this to be valid.
The new tax regime does not allow HRA exemption. If your HRA + other deductions are large, the old regime may save more tax overall.
House Rent Allowance (HRA) is one of the most valuable salary components for Indian employees. Under Section 10(13A) of the Income Tax Act, the exempt portion of HRA is the minimum of three amounts - actual HRA received, 50% of basic salary (40% for non-metro cities), and rent paid minus 10% of basic salary. This formula was established to ensure that employees who genuinely pay rent receive meaningful relief, while capping the benefit for those whose rent is disproportionately low relative to salary.
The Income Tax Department classifies only four cities as metros for HRA purposes - Delhi, Mumbai, Kolkata and Chennai. Residents of Bengaluru, Hyderabad, Pune, Ahmedabad and all other cities get the 40% cap even though their rents are often comparable to metro levels. This distinction has remained unchanged since 1974 despite multiple demands to update the list. If you live in a non-metro city and pay high rent, the 40% ceiling can significantly reduce your exemption compared to a Delhi-based employee earning the same salary.
To claim HRA exemption when filing your ITR, you need rent receipts and your landlord's PAN if annual rent exceeds Rs 1 lakh. If your employer does not include HRA in Form 16 but you pay rent, you can still claim it directly while filing your return. Note that HRA exemption is available only under the old tax regime - switching to the new regime means losing this benefit, so comparing both options using this calculator before making a declaration to your employer in April is strongly recommended.