🏠 Section 10(13A) • Income Tax Rules Rule 2A • FY 2026-27
HRA Calculator India — House Rent Allowance Exemption
Calculate House Rent Allowance (HRA) tax exemption in seconds. Applies the statutory Rule 2A three-condition test, computes 50% metro vs 40% non-metro limits, and highlights Form 12BB compliance rules.
Salary & Rental Declarations
As listed in your monthly CTC breakup or payslip.
Exempt under Section 10(13A) • Winning condition: Rent Paid – 10% of Salary
Under Section 10(13A), your tax exemption equals the least of these 3 statutory amounts
- Delhi (NCT/NCR)50% of Salary
- Mumbai50% of Salary
- Kolkata50% of Salary
- Chennai50% of Salary
Under Rule 2A, major tech cities like Bengaluru, Hyderabad, and Pune are classified as non-metro:
- Bengaluru (Bangalore)40% of Salary
- Hyderabad40% of Salary
- Pune40% of Salary
How Is HRA Exemption Calculated in India?
Under Section 10(13A) of the Income Tax Act read with Rule 2A, your statutory HRA exemption is equal to the lowest of three conditions: (1) Actual HRA received from your employer, (2) Actual rent paid minus 10% of salary (where salary is Basic + DA), and (3) 50% of salary for employees living in Delhi, Mumbai, Kolkata, or Chennai (or 40% of salary for all other cities like Bengaluru, Hyderabad, and Pune). The lowest amount is fully exempt from tax, and any balance HRA is added to gross salary and taxed at applicable slab rates. This deduction is available only under the Old Tax Regime.
1. Section 10(13A) & Rule 2A: The 3-Condition Formula Explained
Salaried individuals who reside in rented accommodations are eligible for House Rent Allowance (HRA) deductions under Section 10(13A) of the Income Tax Act, 1961. The exact formula is defined under Rule 2A of the Income Tax Rules, 1962.
According to Rule 2A, the amount exempt from income tax is the least of the following three values:
Actual HRA Received
The exact total HRA allowance disbursed by your employer as recorded on your payslips and Form 16.
Rent Paid – 10% Salary
Annual rent paid minus 10% of your designated Salary (Basic + DA). If rent paid is ≤ 10% of salary, exemption is ₹ 0.
50% or 40% of Salary
50% of (Basic + DA) if living in Mumbai, Delhi, Kolkata, or Chennai; 40% of salary for all other Indian cities.
2. Metro vs Non-Metro Rules: Why Bengaluru & Hyderabad Are 40%
A common confusion among Indian tech professionals is why major, high-rent cities like Bengaluru, Hyderabad, Pune, Gurugram, and Noida only qualify for the 40% exemption slab instead of the 50% metro bracket.
Under the Income Tax Rules, 1962 (which have not amended this clause), the 50% rate is strictly confined to the four historical constitutional presidency metropolitan areas:
- Delhi (NCT and NCR core): Qualifies for the 50% ceiling.
- Mumbai (MMR): Qualifies for the 50% ceiling.
- Kolkata: Qualifies for the 50% ceiling.
- Chennai: Qualifies for the 50% ceiling.
- All other cities (including Bengaluru, Hyderabad, Pune, Ahmedabad, Jaipur, Kochi): Formally categorized as non-metro under Rule 2A(c), capping the third condition at 40% of salary.
3. Paying Rent to Parents vs Spouse: Tax Legality & Judicial Rulings
Many salaried professionals live in family-owned homes and wonder whether they can claim HRA exemption by paying rent to family members:
Paying Rent to Parents: Allowed
You can legally claim HRA exemption by paying rent to your parents if:
- The house property is legally registered in your parents' name (you cannot be a co-owner).
- A formal rent agreement is drafted and signed.
- Rent is remitted via bank transfer and monthly rent receipts are preserved.
- Your parents declare this rental income under 'Income from House Property' in their ITR (where they can claim a 30% statutory standard deduction under Section 24(a)).
Paying Rent to Spouse: Not Allowed
The Income Tax Department and various ITAT benches (e.g., Delhi ITAT in Abhay Kumar Agarwal) have disallowed HRA claims for rent paid to a spouse because:
- Husband and wife are legally deemed to reside together under mutual matrimonial obligations.
- A landlord-tenant relationship cannot co-exist with a marital relationship in the same home.
- Clubbing of income provisions under Section 64 apply.
4. Claiming Both HRA and Home Loan (Section 24b) Simultaneously
Under the Indian Income Tax Act, you can simultaneously claim both HRA exemption and Home Loan deductions if you satisfy specific conditions:
- Home Owned in a Different City: If your self-owned residential property is situated in your home town or another city, and you are forced to rent an apartment in your employment location (e.g. Pune vs Mumbai), you can claim both HRA under Section 10(13A) and Home Loan interest deduction up to ₹ 2,00,000 under Section 24(b).
- House Under Construction: If you have purchased an under-construction flat on home loan and currently reside in a rented house, you can claim HRA now. The pre-construction interest can be claimed in 5 equal installments once possession is delivered.
- Owned House Rented Out: If you rent out your owned property and reside in another rented flat closer to your workplace, you must declare the rental income from your owned house while simultaneously claiming HRA exemption for the rent you pay.
5. Required Documentation & Form 12BB Proofs
Employers are mandated by the Central Board of Direct Taxes (CBDT) to verify proofs before calculating TDS on salaries:
- Form 12BB Declaration: The statutory investment declaration submitted to your payroll department containing the landlord's name, address, and rent amount.
- Rent Agreement: Valid tenancy contract stipulating the monthly rent, security deposit, and tenancy duration.
- Rent Receipts: Signed rent receipts bearing a ₹ 1 revenue stamp if cash payments exceed ₹ 5,000 (electronic bank transfers are strongly recommended).
- Landlord PAN Card Copy: Legally mandatory if total annual rent paid exceeds ₹ 1,00,000.
- Section 194-IB Compliance (2% TDS): If monthly rent exceeds ₹ 50,000, the tenant must withhold 2% TDS and issue Form 16C to the landlord.
Frequently Asked Questions on HRA Exemption in India
House Rent Allowance (HRA) exemption is a statutory tax deduction under Section 10(13A) of the Income Tax Act, 1961 read with Rule 2A of the Income Tax Rules, 1962. It allows salaried employees living in rented accommodation to exempt a portion or the entirety of their HRA allowance from taxable income.
Under Rule 2A, HRA exemption is the LEAST of three statutory amounts: (1) Actual HRA received from your employer, (2) Actual rent paid minus 10% of salary (Basic + DA), and (3) 50% of salary for Metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40% of salary for all other Non-Metro cities.
Under Rule 2A(c) of the Income Tax Rules, only four designated metropolitan cities qualify for the 50% rate: Mumbai, Delhi (including NCR/NCT), Kolkata, and Chennai. All other Indian cities—including major tech hubs like Bengaluru, Hyderabad, and Pune—are classified as non-metro and qualify for the 40% rate.
No. Under the default New Tax Regime (Section 115BAC), HRA exemption under Section 10(13A) is not permitted. Any HRA component received in your salary is 100% taxable at slab rates under the new regime. To claim HRA exemption, you must opt for the Old Tax Regime.
As per CBDT Circular No. 08/2013, if the total annual rent paid by an employee exceeds ₹ 1,00,000 (i.e. more than ₹ 8,333 per month), it is mandatory to provide the landlord's Permanent Account Number (PAN) on Form 12BB to the employer. If the landlord does not have a PAN, a signed Form 60 declaration must be submitted.
Under Section 194-IB of the Income Tax Act (amended in the Finance Act 2024), if an individual tenant pays monthly rent exceeding ₹ 50,000, they are legally obligated to deduct TDS at 2% (reduced from 5% effective 1st October 2024) and remit it to the government using Challan-cum-Return Form 26QC.
Yes, you can legally pay rent to your parents and claim HRA exemption, provided: (1) Your parents are the legal owners of the residential property, (2) A valid registered or notarized rent agreement exists, (3) Rent is transferred via banking channels with rent receipts issued, and (4) Your parents declare this rental income in their annual Income Tax Returns (ITR).
No. The Income Tax Appellate Tribunal (ITAT) and High Courts have consistently held that a husband and wife are legally deemed to live together under marital obligations. Claiming HRA by paying rent to a spouse is considered a sham transaction, and income clubbing provisions under Section 64 apply.
Yes. You can claim both HRA exemption under Section 10(13A) and Home Loan deductions (interest under Section 24(b) and principal under Section 80C) simultaneously if you live in a rented house in the city of your employment while owning a residential property in a different city or location that is deemed self-occupied or rented out.
For the purposes of Rule 2A, 'Salary' is strictly defined as: Basic Salary + Dearness Allowance (DA) that enters into retirement benefits + Commission based on a fixed percentage of turnover achieved by the employee. Other allowances like Special Allowance, HRA, Medical, and Conveyance are excluded from this definition.
Employees must submit: (1) Form 12BB investment declaration, (2) Signed monthly or quarterly rent receipts with revenue stamps (if paid in cash) or bank transfer statements, (3) Valid rent agreement, and (4) Landlord's PAN card copy if annual rent exceeds ₹ 1,00,000.
Under Condition 2 of Rule 2A, the deduction is computed as 'Rent Paid minus 10% of Salary'. If your annual rent paid is equal to or less than 10% of your salary, this condition evaluates to ₹ 0. Consequently, the least of the three conditions becomes ₹ 0, and your entire HRA will be taxable.
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