House Rent Allowance (HRA): Meaning, Eligibility and Documents
House Rent Allowance is one of the most common components of an Indian salary structure - and one of the most valuable tax breaks for tenants who file under the old regime. This guide explains what HRA is, who can claim the section 10(13A) exemption for FY 2025-26 (AY 2026-27), the paperwork involved, and the situations where HRA is fully taxable.
What is HRA and how is it taxed?
HRA is an allowance paid by an employer to help an employee meet rental costs. It is part of salary and is taxable by default, but section 10(13A) of the Income-tax Act, read with Rule 2A, exempts a portion of it when the employee actually pays rent for the home they occupy. The exempt portion is calculated by the least-of-three formula explained step by step in our HRA calculation guide, and the balance is taxed with salary. You can estimate your own figure in seconds with the HRA calculator.
Who is eligible for the exemption in FY 2025-26?
| Condition | Requirement |
|---|---|
| Employment | Salaried employee receiving HRA as a salary component (Form 16 shows it) |
| Accommodation | Living in rented accommodation actually occupied by you; not a house you own in that city |
| Rent paid | Rent must exceed 10% of salary (basic + qualifying DA + turnover commission), else exemption is nil |
| Tax regime | Old regime only - the new (default) regime taxes the full HRA |
| Landlord | Any genuine landlord, including parents; rent to a spouse is generally disallowed |
Self-employed professionals and employees whose salary has no HRA component cannot use section 10(13A). Their route is the section 80GG deduction (up to Rs. 60,000 a year, with conditions), covered in our HRA exemption rules guide.
Documents you need
- Rent receipts for the year - in practice employers collect them quarterly or annually; a revenue stamp is needed for cash payments above Rs. 5,000 per receipt.
- Rent agreement in your name (or shared, with your share evident).
- Landlord's PAN declared to your employer where annual rent exceeds Rs. 1,00,000; if the landlord has no PAN, a written declaration is required.
- Form 12BB submitted to the employer so payroll allows the exemption and TDS is computed correctly.
- Bank statements/UPI trail proving actual payment - essential for rent paid to parents or relatives.
- TDS proof under section 194-IB where monthly rent exceeds Rs. 50,000 - the tenant must deduct tax from the rent.
Examples: who can and cannot claim
Tenant in Mumbai with HRA
Basic Rs. 8,00,000/year, HRA Rs. 3,20,000, rent Rs. 25,000/month (Rs. 3,00,000). Old regime: exempt HRA = least of Rs. 3,20,000; Rs. 3,00,000 - Rs. 80,000 = Rs. 2,20,000; 50% = Rs. 4,00,000. Rs. 2,20,000 exempt, Rs. 1,00,000 taxable.
No HRA in salary - use 80GG
A startup pays a consolidated salary with no HRA component. Rent paid: Rs. 12,000/month. Section 10(13A) is unavailable, but under section 80GG (old regime) the employee can deduct up to Rs. 60,000 a year, subject to the 80GG limits and Form 10BA.
Living in own flat - fully taxable
An employee receives HRA of Rs. 1,80,000 but lives in his own flat and pays no rent. No exemption is available; the full Rs. 1,80,000 is taxed as salary in both regimes. Submitting fake rent receipts here is a reassessment and penalty risk - AIS and TDS data make detection easy.
HRA and the choice of tax regime
HRA exemption exists only in the old regime, so the real question is whether your HRA exemption plus 80C, 80D and home-loan interest beat the new regime's lower slabs, Rs. 75,000 standard deduction and Rs. 60,000 rebate. For taxable income up to Rs. 12 lakh the new regime gives zero tax anyway. Run both scenarios on the old vs new regime comparison before declaring your choice.
Metro list change from FY 2026-27
For FY 2025-26 returns (this filing season) the 50% salary limit applies only to Delhi, Mumbai, Kolkata and Chennai; every other city, including Bengaluru and Hyderabad, uses 40%. From 1 April 2026 - tax year 2026-27 under the Income-tax Act, 2025 framework - the 50% limit extends to eight cities, adding Bengaluru, Hyderabad, Pune and Ahmedabad. The detailed two-period rules are in our HRA exemption rules guide.
How HRA appears in Form 16 and the ITR
When you declare rent through Form 12BB, your employer computes the exempt portion and shows it in Form 16 Part B as an allowance exempt under section 10(13A); only the taxable balance enters "income from salary" and TDS is lower through the year. If you skipped the declaration, the entire HRA sits inside taxable salary in Form 16 - but the law still allows the exemption. While filing ITR-1 or ITR-2 for AY 2026-27, reduce the exempt amount in the salary schedule under exempt allowances, select the old regime, and keep the documents ready. Expect the lower figure to be compared against AIS/26AS data, so accuracy and proof matter more when the claim is made directly in the return.
Common mistakes
- Claiming HRA without paying rent. Fake receipts are easily cross-checked against AIS, 26AS and the landlord's return.
- Forgetting the landlord's PAN above Rs. 1 lakh rent - payroll disallows the exemption and excess TDS follows.
- Paying rent to a spouse. Courts and the department generally reject such claims; rent to parents needs a genuine, documented arrangement.
- Expecting the exemption in the new regime. Full HRA is taxable there.
- Skipping 194-IB TDS on rent above Rs. 50,000/month - the tenant, not the landlord, bears the default.
- Not claiming missed HRA in the ITR. If you forgot to declare to your employer, you can still claim it while filing - with proofs kept ready.
Frequently asked questions
What is House Rent Allowance?
A salary component paid towards rented accommodation, partly exempt under section 10(13A) when you actually pay rent and file under the old regime.
Who can claim the HRA exemption for FY 2025-26?
Salaried employees who receive HRA, live in rented premises, pay rent above 10% of salary and opt for the old regime. Others can look at section 80GG.
Can I pay rent to my parents?
Yes, if it is genuine - parent owns the house, rent moves by bank transfer, receipts exist and the parent declares the income.
Which documents are required?
Rent receipts, rent agreement, payment proof, landlord's PAN above Rs. 1 lakh annual rent, Form 12BB for the employer, and 194-IB TDS proof above Rs. 50,000 monthly rent.
Is HRA exempt in the new regime?
No - the exemption is an old-regime benefit only.
How much of HRA is exempt?
The least of actual HRA, rent minus 10% of salary, and 50%/40% of salary depending on the city - see the step-by-step computation guide for worked examples.
Claim your HRA correctly this filing season
All India ITR's experts verify your rent documents, compute the exact exemption, compare regimes and file your return so no eligible rupee is left on the table.
Related current ITR guides
More AY 2026-27 tax guides
Save tax: Home loan benefits · NPS (80CCD) · Donations (80G) · Education loan (80E) · Interest income (80TTA/80TTB) · Form 15G/15H · Capital gains exemptions (54/54F/54EC)
Investors and traders: F&O and intraday tax · ESOP and RSU tax · Share buyback tax · Foreign income and Schedule FA · Gift tax (56(2)(x)) · HUF taxation
Calculators and tools: Income tax calculator · Advance tax calculator · 80C tax-saving calculator · NPS calculator · Gratuity calculator · EPF calculator · Crypto tax calculator · HRA calculator
Filing and compliance: Section 87A rebate · Marginal relief · Form 10-IEA · PAN-Aadhaar link · AIS and TIS · ITR-U updated return · Discard ITR and condonation · TDS on rent and property · Income Tax Act 2025
Sources reviewed
- Income Tax Department: official House Rent Allowance calculator
- Income Tax Department: Salaried individuals for AY 2026-27 - allowances and regimes
This overview covers HRA for FY 2025-26 (AY 2026-27) filings. Edge cases - government employees, shared rentals, rent-free accommodation or part-year occupation - should be verified against the rules or with an expert before claiming.
