Exemption Rules
How is HRA Exemption Calculated?
According to Section 10(13A) of the Income Tax Act, the exemption is the minimum of these three:
- Actual HRA received from employer.
- 50% of (Basic Salary + DA) for Metro cities, or 40% for Non-Metro cities.
- Actual Rent Paid minus 10% of (Basic Salary + DA).
Important Notes
- Metro Cities: Only Delhi, Mumbai, Kolkata, and Chennai are considered metro cities for HRA (50%). All others (Bangalore, Hyderabad, Pune, etc.) are Non-Metro (40%).
- Proof: You need to submit rent receipts (and PAN of landlord if rent > ₹1 Lakh/year) to your employer.
- New Tax Regime: HRA exemption is NOT available under the New Tax Regime.
Can I pay rent to parents?
Yes, you can claim HRA by paying rent to your parents. You must transfer money to their bank account, and they must declare it as "Income from House Property" in their tax returns.