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Glossary · HR & Payroll

What is HRA (House Rent Allowance)?

HRA (House Rent Allowance) meaning, the Section 10(13A) tax exemption rule and a worked example of how much HRA exemption an employee can claim.

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HRA (House Rent Allowance) — meaning

House Rent Allowance (HRA) is a salary component paid to employees towards rent, partly exempt from income tax under Section 10(13A) of the Income-tax Act if the employee actually pays rent.

What is HRA?

House Rent Allowance (HRA) is an allowance employers pay as part of salary to help employees meet rental housing costs. A portion of HRA received can be claimed as tax-exempt under Section 10(13A) of the Income-tax Act, 1961, provided the employee actually pays rent for residential accommodation.

Who can claim HRA exemption

  • Salaried employees who receive HRA as part of their salary structure and who actually pay rent for their residence.
  • Employees living in a self-owned house cannot claim HRA exemption on that property for the period they live there.
  • Rent receipts and, where required, the landlord's PAN must be furnished to the employer for exemption to be considered in TDS computation.

How the HRA exemption is calculated

The exempt amount is the least of: actual HRA received; rent paid minus 10% of salary (basic + DA); or a prescribed percentage of salary that depends on whether the employee lives in a metro or non-metro city, as defined under the Income-tax Rules.

Worked example: an employee with basic salary ₹30,000/month, HRA received ₹15,000/month, and actual rent paid ₹18,000/month would compute: (a) actual HRA = ₹15,000; (b) rent paid − 10% of basic = ₹18,000 − ₹3,000 = ₹15,000; (c) the applicable metro/non-metro percentage of basic salary. The exemption allowed is the lowest of the three figures.

Common mistakes

  • Claiming HRA exemption without retaining rent receipts or a rent agreement for verification.
  • Not disclosing the landlord's PAN when annual rent crosses the threshold that requires it, per Income Tax Department rules.
  • Claiming HRA exemption while also claiming home loan interest deduction for the same self-occupied property without understanding how the two interact.

Sources

Last updated 2026-10-12.

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Related terms

Gross SalaryGross salary is the total salary an employee earns before any statutory or voluntary deductions — including basic pay, allowances and bonuses, but excluding deductions like PF, professional tax and TDS.CTC (Cost to Company)CTC (Cost to Company) is the total yearly cost an employer bears for an employee, including fixed pay, variable pay, and employer contributions — not the amount credited to the employee's bank account.Form 16Form 16 is the annual TDS certificate an employer issues to an employee, showing the salary paid and tax deducted at source during the financial year.

HRA (House Rent Allowance) — FAQs

Is HRA fully tax exempt?+

No. Only the least of three amounts — actual HRA received, rent paid minus 10% of salary, or a prescribed percentage of salary based on city — is exempt under Section 10(13A); the remaining HRA is taxable.

Can I claim HRA if I don't pay rent?+

No, HRA exemption requires that the employee actually pays rent for residential accommodation they occupy; it cannot be claimed if no rent is paid, including for a self-owned home being lived in.

Do I need the landlord's PAN to claim HRA exemption?+

The Income Tax Department requires the landlord's PAN to be furnished when annual rent exceeds the threshold it specifies; check incometaxindia.gov.in for the current requirement.

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