House Rent Allowance (HRA) Exemption Under Section 10(13A)
House Rent Allowance (HRA) is an allowance paid by an employer to help an employee meet rental housing costs. Under Section 10(13A) of the Income-tax Act, 1961, read with Rule 2A of the Income-tax Rules, 1962, an eligible salaried employee may exclude a calculated portion of HRA from taxable salary for years governed by that Act.
Updated 10 October 2026. The Income-tax Act, 2025 applies from 1 April 2026. References to Section 10(13A) and Rule 2A below describe the framework under the 1961 Act for applicable earlier years. For tax year 2026-27 onwards, confirm the corresponding provisions and rules under the new legislation and the tax regime selected.
What Section 10(13A) means
Section 10(13A) exempted a prescribed portion of a special allowance specifically granted by an employer to meet expenditure actually incurred on rent for residential accommodation occupied by the employee. The exemption is unavailable where the employee lives in accommodation owned by them or does not actually incur rental expenditure.
| Eligible taxpayer | A salaried individual receiving HRA from an employer. |
|---|---|
| Income covered | House Rent Allowance included in salary. |
| Exempt amount | Lowest amount calculated under Rule 2A; any balance is taxable salary. |
| Principal conditions | Actual rent paid for residential accommodation occupied by the employee, qualifying HRA received and compliance with applicable tax-regime rules. |
How to calculate HRA exemption under Rule 2A
For the period in which the employee occupies rented accommodation, determine the least of the following:
- Actual HRA received from the employer for the relevant period.
- Rent paid minus 10% of salary for that period. A negative result is treated as zero.
- 50% of salary if the rented residence is in Mumbai, Kolkata, Delhi or Chennai; 40% of salary for other locations, under the historical Rule 2A framework.
For this calculation, salary generally means basic salary plus dearness allowance to the extent it forms part of retirement benefits and commission based on a fixed percentage of turnover achieved by the employee. Other allowances and most bonuses are not included. Calculate separately when salary, rent, HRA or place of residence changes during the year.
HRA exemption example
Suppose an employee lives in Delhi, receives basic salary of Rs 60,000 per month and HRA of Rs 25,000 per month, and pays monthly rent of Rs 22,000. Assume no qualifying DA or turnover-based commission.
| Rule 2A component | Monthly amount |
|---|---|
| Actual HRA received | Rs 25,000 |
| Rent minus 10% of salary: Rs 22,000 - Rs 6,000 | Rs 16,000 |
| 50% of salary (Delhi) | Rs 30,000 |
| Exempt HRA: lowest of the above | Rs 16,000 |
| Taxable HRA: Rs 25,000 - Rs 16,000 | Rs 9,000 |
For a full year with unchanged figures, the historical-framework exemption would be Rs 1,92,000 and taxable HRA Rs 1,08,000. Actual entitlement depends on the law and regime applicable to the tax year.
Eligibility, rent proof and important conditions
- HRA must be part of salary: A self-employed person or an employee who receives no HRA cannot claim this particular exemption; separate provisions for rent-related deductions may apply where eligible.
- Actual rental payment: Maintain a valid rental agreement, rent receipts and bank-transfer or other reliable payment evidence.
- Landlord PAN: Under the historical salary-TDS documentation framework, employers generally required the landlord's PAN when annual rent exceeded Rs 1,00,000; check current employer reporting requirements and applicable rules.
- Own house: HRA exemption cannot be claimed for rent-free accommodation or a residence owned and occupied by the employee. Owning a different property does not automatically disqualify genuine rent paid elsewhere.
- Rent to relatives: Genuine, documented rent arrangements can require close scrutiny; payment and ownership evidence should support the claim.
- Tax regime: HRA exemption is generally unavailable under the concessional new tax regime; review the regime and applicable legislation before claiming it.
HRA and the new income-tax law from April 2026
The Income-tax Act, 2025 replaced the Income-tax Act, 1961 for the tax years to which the new law applies. The old citation Section 10(13A) remains relevant when reviewing returns and assessments governed by the 1961 Act. For tax year 2026-27 and later, consult the enacted 2025 Act, applicable rules and official guidance rather than assuming the earlier section numbering or computation language remains unchanged.
Frequently asked questions
Can I claim HRA exemption without paying rent?
No. Actual expenditure on rent for the occupied residence is an essential condition; an allowance by itself does not establish an exemption.
Is HRA fully tax-free?
Not necessarily. Only the lowest amount calculated under the applicable prescribed formula is exempt, subject to the tax regime and governing law.
Does the 50% HRA limit apply to every metropolitan city?
No. Under historical Rule 2A, the 50% salary factor applies specifically to Mumbai, Kolkata, Delhi and Chennai. Other cities use the 40% factor.
Can I claim HRA and home-loan benefits together?
They may coexist where the underlying conditions of each provision are independently satisfied, including genuine rented residence and eligibility under the selected tax regime.
Official legal sources and further reading
- Income Tax Department - income-tax legislation
- India Code - central legislation and statutory texts
- Income Tax Department e-filing portal
- Gazette of India - notifications and rules
- Other income-tax exemptions under Section 10
- Guide to tax-exempt income
- Chapter VI-A deductions explained
This is general educational information. Verify statutory provisions, rules, amendments and employer documentation requirements for the relevant tax year before filing a return.