Tax · Rent → tax break
HRA Exemption
HRA (House Rent Allowance) is one of the largest tax savings available to salaried Indians — but only in the OLD regime. Exempt amount = least of (a) actual HRA received, (b) rent paid minus 10% of basic salary, (c) 50% of basic (metro) or 40% (non-metro). Most employees over-claim because they don't know the formula caps it.
Who needs this
Salaried employees in the OLD regime who pay rent. Must have HRA component in CTC. Self-employed cannot claim HRA but may claim Section 80GG instead.
Key dates
- Rent receipts collectionMonthly — keep digital copies
- Landlord PAN deadline (rent > ₹1L)Before FY end (Mar 31)
- ITR filing — claim HRAJul 31, 2026
Key decisions
- Q1
Do I need a rent agreement?
For rent < ₹1L/yr: receipts only. For rent > ₹1L/yr (₹8.3K/month): rent agreement + landlord's PAN MANDATORY. If landlord refuses PAN, file Form 60.
- Q2
Can I pay rent to my parents?
YES — but parents must report it as rental income in their ITR (taxable for them at slab rate). Bank transfer + rent agreement + landlord-tenant relationship needs to be defensible if scrutinised.
- Q3
What if I don't get HRA?
Use Section 80GG instead — caps at ₹60K/year (₹5K/month). Much smaller benefit but available to self-employed + salaried-without-HRA.
- Q4
Working from home — can I still claim?
Yes, if rent is genuinely paid where you reside. WFH doesn't disqualify HRA. But if you stay rent-free with parents and 'declare' rent, that's tax fraud.
CBDT rules + tax-act references
- HRA exempt = LEAST of (actual HRA · rent - 10% basic · 50%/40% basic).
- Metro = Mumbai/Delhi/Kolkata/Chennai only. Bengaluru/Hyderabad/Pune = non-metro for HRA.
- Landlord PAN mandatory if annual rent > ₹1L (₹8,333/month).
- Section 80GG fallback: ₹5K/month or 25% income (whichever lower) for non-HRA cases.
All tax topics
Recommended →Old vs New tax regime calculator