HRA Exemption Rules & Calculation for FY 2026-27: Section 10(13A) Guide
Maximize your House Rent Allowance (HRA) tax exemption with complete clarity on Section 10(13A) provisions, 3-point calculation formula, metro vs non-metro limits, rent receipt proofs, and landlord PAN mandatory rules.
What is House Rent Allowance (HRA) & How Does It Save Tax?
House Rent Allowance (HRA) is a salary component provided by employers to meet accommodation expenses. Under Section 10(13A) read with Rule 2A of the Income Tax Rules, salaried employees paying rent for residential accommodation can claim exemption on HRA, directly reducing their taxable salary income.
Key Eligibility Conditions
To claim HRA exemption under the Income Tax Act, the taxpayer must satisfy the following conditions:
- Must be a salaried individual receiving HRA as part of the salary structure
- Must actually incur rent expenditure for residential accommodation occupied by the taxpayer
- The rented property must not be owned (fully or partially) by the taxpayer
- HRA exemption is available only when opting for the Old Tax Regime (Section 115BAC New Regime does not permit HRA exemption)
How HRA Exemption is Calculated (3-Point Rule)
Under Rule 2A, the exempt HRA amount is the minimum of the following three calculations:
Definition of Salary for HRA
For HRA exemption purposes, 'Salary' includes:
- Basic Salary
- Dearness Allowance (DA), if terms of employment provide for retirement benefits
- Commission based on fixed percentage of turnover achieved by employee
- Special allowance and other allowances are excluded from this calculation
| Calculation Condition | Metro Cities (Delhi, Mumbai, Kolkata, Chennai) | Non-Metro Cities (All other locations) |
|---|---|---|
| Condition 1 | Actual HRA received from employer | Actual HRA received from employer |
| Condition 2 | Actual rent paid minus 10% of basic salary + DA | Actual rent paid minus 10% of basic salary + DA |
| Condition 3 | 50% of (Basic Salary + DA) | 40% of (Basic Salary + DA) |
Documentation Required & Landlord PAN Rules
Proper documentation ensures smooth HRA claims during Form 16 verification and ITR filing:
Rent Receipts & Agreements
Checklist of supporting proofs:
- Valid Rent Agreement: Registered or notarized rental agreement specifying rent amount, tenancy period, and landlord details
- Rent Receipts: Signed rent receipts for all 12 months with revenue stamp if cash payment exceeds ₹5,000
- Bank Transaction Proofs: Bank transfer/UPI statements showing regular rent remittances to the landlord
Mandatory Landlord PAN Rule
As per CBDT Circular No. 08/2013, if total annual rent paid exceeds ₹1,00,000 (₹8,333/month), it is mandatory to provide the landlord's PAN to the employer. If the landlord does not have a PAN, a signed declaration in Form 60 along with identification proof is required.
Special HRA Scenarios: Parents, Home Loans & Shared Rent
Common real-world HRA situations analyzed under income tax provisions:
Paying Rent to Parents
You can pay rent to your parents and claim HRA if they own the house. However, the parents must declare this rental income in their respective Income Tax Return (ITR), and payments should be made via verifiable banking channels.
Simultaneous HRA & Home Loan Tax Benefits
You can claim both HRA exemption and home loan tax benefits (Section 24(b) interest up to ₹2 Lakhs & Section 80C principal up to ₹1.5 Lakhs) if your owned house is in a different city or you cannot occupy it due to employment location constraints.
Frequently Asked Questions
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Calculate HRA ExemptionRelated Knowledge & Guides
View all Income Tax →Complete ITR Filing Guide 2026-27
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