What Is HRA and How Is it Calculated?

HRA i.e. House Rent Allowance is a exemption which is provided to salaried employees as per section 10(13A) of Income Tax Act. The said exemption was generally provided for individuals who works in different cities or to relocate due to their jobs and have to bear additional rent expenses.

Generally, an employer includes HRA component in the salary structure of the employees, so that they can take benefit of the rent expense paid by them by claiming exemption as per Schedule III (Sr. No. 11) of the Income Tax Act.

The entire HRA received is not always fully exempt from tax. The least of the following three will be taken to exempt from tax

1. Actual HRA received (as a salary component)
2. 50% of salary for those living in metro cities (Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad, and Bengaluru) and 40% of salary for those living in non-metro cities. (salary only includes basic salary and dearness allowance)
3. Actual Rent paid minus 10% of the salary (salary only includes basic salary and dearness allowance)

*Individuals can claim a house rent allowance exemption only if they opt for Old Tax Regime.

Additionally, there are some basic rules to follow while determining the taxable amount. For instance, if the amount of rent paid by the employee yearly exceeds Rs.1,00,000, it is mandatory to provide the PAN number of your landlord while filing an ITR. Also relationship between landlord and employee should be mentioned.

Although self-employed individuals cannot claim HRA exemption as per Schedule III (Sr. No. 11), they can claim similar benefits through Section 134 of the Income Tax act.

Section 134 of the Income Tax Act provides tax relief to individuals (both salaried - without HRA component and self-employed taxpayers) who pay rent but do not receive House Rent Allowance (HRA).

The lowest of these will be considered as the deduction under this section-

• Rs.5,000 per month or 60,000 per year
• 25% of the total income before allowing deduction for expenditure under this section
• Actual rent less 10% of income before allowing deduction for expenditure under this section

In addition to the basic rules mentioned above, you must also keep certain things in mind before trying to claim HRA benefits.

Following are some important points to know how HRA can be claimed:

Even if you have availed of a home loan, you can still claim HRA benefits subject to conditions mentioned under the Income Tax Act, 2025.

• It is mandatory to provide your landlord’s PAN Card details if your house rent per annum exceeds Rs. 1 lakh.
• If your landlord is a non-resident Indian (NRI), you need to deduct a Tax Deducted At Source (TDS) of 30% before paying the rent.
• In case you are living in your own home, the house rent allowance paid by your employer will not be exempted from income tax.
• Employees without a specific HRA component cannot claim HRA exemption in income tax under Schedule III (Sr. No. 11) but can claim other benefits through Section 134 of the income tax act.

An HRA calculator is a simple tool that helps estimate the HRA exemption you may claim. You enter a few salary details, your rent, and the city type. The tool then applies the tax rule and shows the likely exempt amount. It gives a quick estimate, though the final claim should still match your salary records and rent documents.

Start with four details: basic salary, HRA received, rent paid, and city type. Then enter the dearness allowance, if it forms part of the salary for retirement benefits. Once these numbers are filled in, the tool compares the three rule-based limits as mentioned above.

Not everyone can claim an HRA exemption. The benefit is mainly for salaried employees who receive HRA as part of their salary and lives in rented accommodation. Rent must be paid for the relevant period. If you stay in your own house, the exemption will not apply. Proper salary details and rent records are important. The old tax regime remains the usual setting for this benefit.

Keep rent receipts, the rental agreement if available, and proof of rent payment. Where aggregate rent paid during the year exceeds ₹1 lakh, landlord details become important. Under the income tax law, the landlord's name, address, PAN, and relationship with the landlord are required for HRA claims. Employees are expected to furnish evidence in Form No. 124 to the employer for tax deduction purposes under the draft framework. The relationship with the property owner is also to be disclosed. The recipient should also report such rental income on the return, where applicable.

Our content given in this article is as per the existing provisions, laws and regulations as per the Income Tax Act, 2025 and Income Tax Rules, 2026 issued thereunder. Tax laws are subject to amendments made thereto from time to time. The benefits / guidance mentioned herewith should not be considered as opinion / view of the Company. We request to seek independent view from your personal tax advisor on applicable tax benefits / guidance under the said article.