House Rent Allowance is the largest tax-free component most salaried tenants have — under the old regime. Every January, "HRA calculation" and "rent receipt for HRA" spike as employers ask for proofs. Here is the whole picture, including the rules that trip people up.
The formula (Section 10(13A))
Exempt HRA is the least of:
- Actual HRA received
- Rent paid minus 10% of salary (basic + DA)
- 50% of salary in a metro (Delhi, Mumbai, Kolkata, Chennai) or 40% elsewhere
Whatever is above the exempt amount is taxed as salary.
Example (Bengaluru — non-metro for HRA)
Basic ₹60,000/month, HRA ₹24,000/month, rent ₹22,000/month.
- HRA received: ₹2,88,000
- Rent − 10% salary: 2,64,000 − 72,000 = ₹1,92,000
- 40% of salary: ₹2,88,000
Exempt = ₹1,92,000; taxable HRA = ₹96,000. Run yours in the HRA exemption calculator. Note Bengaluru, Hyderabad, Pune, Gurugram and Noida are not metros for this purpose — a common mistake.
What your employer will ask for
| Annual rent | Proof required |
|---|---|
| Up to ₹1 lakh (≈ ₹8,333/month) | Usually nothing, or a declaration |
| Above ₹1 lakh | Rent receipts and the landlord's PAN |
| Landlord has no PAN | A declaration from the landlord in the prescribed format |
Generate monthly or quarterly receipts with the rent receipt generator — it fills the period, amount in words and landlord PAN, and adds a revenue-stamp box for cash payments above ₹5,000.
TDS if rent exceeds ₹50,000 a month
Under Section 194-IB, an individual paying rent above ₹50,000/month must deduct 2% TDS (reduced from 5% in October 2024) once a year — in the last month of the tenancy or financial year — and deposit it with Form 26QC within 30 days. No TAN needed. Landlords increasingly expect it; use the TDS calculator to compute the amount.
Paying rent to parents or spouse
- Parents: allowed if you actually pay rent to a property they own, by bank transfer, with receipts and an agreement. They must declare the rent as income (they can claim the 30% standard deduction on it). Paying rent to a parent for a house you co-own is not allowed.
- Spouse: courts have allowed it in specific cases, but the department views it with suspicion. Avoid unless the arrangement is genuine and documented.
HRA when you own a house
You can claim HRA if you live in a rented house in the city you work in and own a house elsewhere (or even in the same city, if there's a genuine reason such as distance). You can then also claim home-loan interest under Section 24 on the owned house.
No HRA in your salary?
Section 80GG allows a deduction for rent paid — the least of ₹5,000/month, 25% of total income, or rent minus 10% of income — if you (or your spouse/minor child) own no house in the city and don't receive HRA.
New regime users: none of this applies
The new regime has no HRA exemption. If your HRA exemption plus other deductions exceed roughly ₹5.5–6 lakh, the old regime may still win — compare in the regime calculator and read old vs new regime.
FAQ
Do I need a rent agreement for HRA?
Employers usually require receipts; many also ask for an agreement above ₹1 lakh annual rent. Have one — it also protects you as a tenant.
Can I claim HRA for a PG or hostel?
Yes, if you pay rent for accommodation and have receipts.
Landlord refuses to give PAN. What now?
Get a signed declaration (Form 60-style) stating they don't have a PAN; the employer can accept it. If they have a PAN and refuse, you can still claim HRA in your return with receipts, but be ready to substantiate.
Is HRA exempt if I pay rent in cash?
Yes, but receipts above ₹5,000 should bear a revenue stamp, and cash payments above ₹2 lakh in a year for a transaction attract Section 269ST issues for the receiver.