The three-rule test
Under Section 10(13A), the tax-free part of HRA is the lowest of:
- Actual HRA received from your employer
- Rent paid minus 10% of salary (basic + DA)
- 50% of salary if you live in Delhi, Mumbai, Kolkata or Chennai; 40% elsewhere
Whatever is left of your HRA after this is taxable.
Good to know
- HRA exemption is available only under the old tax regime. If you pick the new regime, all HRA is taxable but you get lower slab rates.
- If rent exceeds ₹1,00,000 a year, you must give your landlord's PAN to your employer.
- Paying rent to parents is allowed if it is real — transfer the money and they declare it as income.
- You need rent receipts; our rent receipt generator makes a year's worth in one PDF.
Common questions
I own a house in another city — can I still claim HRA?
Yes, if you actually pay rent where you work and live.
Bengaluru, Hyderabad, Pune are metros, right?
Not for HRA. Only Delhi, Mumbai, Kolkata and Chennai get the 50% rule; everywhere else is 40%.