House Rent Allowance (HRA) is a special allowance given by employers to employees for meeting rental accommodation expenses. Under Section 10(13A) of the Income-tax Act, 1961, employees can claim exemption on HRA received, subject to certain conditions and limits.

HRA Exemption Conditions

Eligibility Criteria

Employee Status

Must be a salaried employee

Self-employed individuals not eligible

Directors may be eligible

Accommodation

Must actually pay rent for accommodation

Cannot be staying in own house

Rent receipts must be maintained

Documentation

Rent receipts or rent agreement required

PAN of landlord (if annual rent > ?1 lakh)

Form 12BB for exemption claim

HRA Exemption Calculation

HRA Exemption Formula

HRA Exemption = Minimum of the following:

Limit 1: Actual HRA Received

The actual HRA amount received from employer

Limit 2: Actual Rent Paid

Rent actually paid minus 10% of basic salary

Limit 3: City-based Limit

50% of basic salary (metro cities) or 40% (non-metro cities)

HRA Limits by City Type

City Type	Cities Included	HRA Limit	Calculation
Metro Cities	Delhi, Mumbai, Chennai, Kolkata	50%	50% of Basic Salary
Non-Metro Cities	All other cities	40%	40% of Basic Salary

HRA Exemption Examples

Practical Examples

Example 1: Metro City Employee

Basic Salary: ?6,00,000 | HRA Received: ?1,80,000 | Monthly Rent: ?25,000

Limit 1: ?1,80,000 | Limit 2: ?3,00,000 | Limit 3: ?3,00,000

HRA Exemption: ?1,80,000

Example 2: High Rent in Non-Metro City

Basic Salary: ?4,00,000 | HRA Received: ?1,20,000 | Monthly Rent: ?35,000

Limit 1: ?1,20,000 | Limit 2: ?4,20,000 | Limit 3: ?1,60,000

HRA Exemption: ?1,20,000

Example 3: Rent Limit Applies

Basic Salary: ?3,00,000 | HRA Received: ?1,50,000 | Monthly Rent: ?15,000

Limit 1: ?1,50,000 | Limit 2: ?1,80,000 | Limit 3: ?1,50,000

HRA Exemption: ?1,50,000

HRA vs. Actual Rent Paid

The exemption is calculated based on actual rent paid, but there's a catch - you can claim exemption only on rent paid in excess of 10% of your basic salary. This is to ensure that HRA benefits employees who actually need to rent accommodation.

Conveyance Allowance Exemption

In addition to HRA, employees can claim a fixed conveyance allowance exemption of ?19,200 per annum under Section 10(14) of the Income-tax Act. This is available for transportation expenses and doesn't require any bills or receipts.

LTA (Leave Travel Allowance)

Leave Travel Allowance is another tax-free component that can be claimed for travel expenses. Unlike HRA, LTA can be claimed for travel within India and requires submission of bills. The exemption is available for self, spouse, children, and dependent parents.

Filing HRA Exemption

To claim HRA exemption, employees need to submit Form 12BB to their employer. This form includes details of HRA received, rent paid, and landlord's PAN (if applicable). The employer then considers this information while calculating monthly TDS.

HRA for Self-Employed

Self-employed individuals cannot claim HRA exemption as they don't receive HRA from any employer. However, they can claim a deduction under Section 80GG for rent paid, subject to certain conditions and limits.

Key Takeaways for HRA Exemption

HRA exemption is available under Section 10(13A) for salaried employees
Exemption is the minimum of: HRA received, actual rent paid, or city-based limit
Metro cities (Delhi, Mumbai, Chennai, Kolkata): 50% of basic salary
Non-metro cities: 40% of basic salary
Rent receipts and landlord's PAN required for claims over ?1 lakh
Conveyance allowance of ?19,200 is fully exempt
LTA can be claimed for domestic travel expenses
Form 12BB must be submitted to employer for claiming exemption
Self-employed individuals cannot claim HRA but can claim Section 80GG
Proper documentation is essential to avoid disputes

HRA Exemption Calculator

Salary Information

Rent Information

HRA Exemption Summary

HRA Limits Breakdown

Tax Savings

Understanding HRA Exemption