Learning article
HRA Exemption — How to Calculate and Claim It
Understand how the House Rent Allowance (HRA) exemption works, how to calculate it, and what documents you need.
Quick takeaways
HRA exemption can be claimed only if you are paying rent and receiving HRA as part of salary.
The exemption is the minimum of three amounts: actual HRA received, rent paid minus 10% of salary, and 40‑50% of salary.
You need rent receipts and the landlord’s PAN if rent exceeds ₹1 lakh per year.
Overview
Who can claim HRA?
Salaried individuals who receive HRA as a component of their salary and are paying rent for residential accommodation can claim the exemption.
Self‑employed individuals cannot claim HRA, but they can deduct rent paid under Section 80GG (subject to conditions).
Key concepts
How to calculate the exemption
Step 1: Actual HRA received from employer.
Step 2: Rent paid annually minus 10% of your basic salary + DA (forming part of retirement benefits).
Step 3: 40% of basic salary + DA (50% for metro cities like Mumbai, Delhi, Chennai, Kolkata).
The least of these three amounts is the exempt HRA. The rest is taxable.
Important facts
Documents required
Rent receipts (signed by landlord, with revenue stamp if cash payment > ₹5,000 per receipt).
PAN of landlord if total rent paid in the year exceeds ₹1 lakh.
Rental agreement (optional but recommended).
Common mistakes
Common errors
Claiming HRA when living in your own house or with parents without paying rent (fake rent receipts).
Forgetting to include landlord’s PAN when required, leading to disallowance.
Not reducing the exemption calculation for the months you stayed in a non‑rented place.
FAQs
Common questions
Keep reading
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