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Last updated on: July 29, 2025
House Rent Allowance (HRA) is a salary component provided by employers in India to employees to cover their rental housing expenses. HRA is partially or fully exempt from income tax under Section 10(13A) of the Income Tax Act, subject to certain conditions. The exemption amount depends on factors like salary, HRA received, actual rent paid, and the city of residence (metro or non-metro). To claim HRA exemption, employees must live in rented accommodation and may need to provide rent receipts or rental agreements as proof. Understanding HRA rules helps salaried individuals optimize their tax liabilities and better manage their housing expenses, making it an essential part of salary structuring for those living in rented houses.
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Read BioHouse Rent Allowance (HRA) is an important salary component for lakhs of salaried employees across India. If you receive HRA as a part of your salary and live in a rented accommodation, this article will help you understand HRA rules in India for 2025, how you can claim HRA exemption, important calculations and details you should know with examples, expert tips and frequently asked queries from real-life experience.
House Rent Allowance or HRA is a financial benefit provided by employers to employees to help them pay rent for residing in a house of their choice. In 2025, as cost of living and rent prices continue to rise in Indian cities such as Mumbai, Bangalore, Delhi NCR and even smaller towns, HRA plays a vital role in providing tax saving opportunities and financial aid to employees renting homes.
HRA also helps in employee retention and satisfaction as it lessens the burden of accommodation expenses, especially in metros where rents can be quite high.
HRA is calculated as a percentage of an employee’s basic salary. The percentage may vary from 40 percent in non-metro cities to 50 percent in metro cities like Mumbai, Delhi, Chennai or Kolkata. Employers reimburse HRA only if the employee stays in a rented home and submits valid proof of rent such as rent receipts or rental agreement.
The taxability of HRA is governed by Section 10(13A) of the Income Tax Act 1961 and Rule 2A of the Income Tax Rules. Full HRA received is not exempt from income tax. The minimum amount of the following three is exempted from income tax:
Any remaining amount is taxable as part of the salary.
Salaried employees who do not receive HRA but pay rent can still claim a similar tax deduction under Section 80GG, with certain limits.
No, HRA is only applicable if you pay rent for an accommodation you do not own. If you are residing in your own property, you cannot claim HRA benefits.
Self-employed individuals do not get HRA as they are not on a salaried payroll. But they may use Section 80GG to claim deduction for rent paid, if eligible.
You can claim HRA if you have a valid rental agreement and you actually pay rent even to your parents. However, the payment must be genuine and the recipient (parent) should report this as income in their tax return. You cannot claim HRA by paying rent to your spouse as this is not accepted by tax authorities.
Q: Can unmarried couples claim HRA? A: Yes, as long as both have legal rental agreements, pay rent, and can submit proof, HRA can be claimed individually.
These documents need to be submitted before end of financial year to your employer. Digital rent payment apps and online rent receipt generators are widely accepted in 2025.
HRA exemption is the minimum of these three:
Imagine Ms. Priya works in Mumbai with the following details:
Calculation for yearly exemption:
The minimum of the above three is Rs 2,16,000. This is the HRA exempted from tax. The remaining HRA is taxable.
Several Indian employers now provide online portals to upload rent agreements and e-receipts, making HRA exemption claims faster for 2025.
Q: What if my rent is less than 10 percent of my basic salary? A: You are not eligible for any HRA exemption since one of the conditions is that rent paid should be more than 10 percent of basic.
Online marketplaces like NoBroker, Housing, and MagicBricks now let you compare rental properties, negotiate rent, and even generate official rent receipts for HRA claims in a single platform.
| Feature | HRA Exemption | Section 80GG |
|---|---|---|
| Who can claim | Salaried employees receiving HRA | Self-employed or salaried without HRA |
| Maximum Deduction | Based on HRA rules, no fixed limit | Rs 5,000 per month or 25 percent of total income |
| Proof needed | Rent receipts, agreement | Rent receipts, declaration (Form 10BA) |
| City-based limits | 50 percent for metros | Unified across India |
| PAN of landlord compulsory | Yes, if rent above 1 lakh/year | Yes, similar rule |
Employees who do not receive HRA in their salary but pay rent can claim tax deduction through Section 80GG.
When I started working in Bangalore, my employer included HRA in my salary. The process to claim exemption required rent receipts and a signed agreement. One key challenge was getting the PAN details from my landlord, but thanks to growing use of digital rent payment platforms, this has become faster.
In 2025, the major difference is almost all large companies and fintech apps have automated e-verification tools. They allow you to upload rent proof, and the HR team can approve it in minutes. Also, many online rental marketplaces now let you download stamped rent receipts and compare thousands of rental houses as per your HRA budget. This helps you make better renting decisions and maximise tax benefit hassle free.
Q: Can I claim both HRA and home loan interest deduction? A: Yes, if you own a house in a different city and live on rent elsewhere for work, you can claim both benefits.
Financial planners suggest setting your rent just over 10 percent of basic salary to claim maximum HRA exemption, while still keeping your CTC optimally structured.
Generally, HRA is a percentage of basic salary and is fairly standardised, but the exact figure can vary from 40 percent in small towns to 50 percent in metros. Many private companies and new-age startups provide flexible HRA allotment as part of a flexi-benefit salary package, while public sector companies have stricter, pre-set HRA bands.
It is wise to review your offer letter and ask your employer for exact HRA allocation before joining.
Some companies now allow you to reallocate portions of your salary between HRA, LTA, and medical allowance in their digital payroll systems to suit your needs annually.
Yes, you can pay rent to your parents and claim HRA as long as:
It is important that this is a bona fide transaction. Tax authorities may scrutinise in case of discrepancy or missing documentation.
Q: Can I pay rent to wife or husband and claim HRA? A: No, this is not allowed under Indian tax rules.
Q: Is GST applicable on residential rent for HRA? A: No, GST is not applicable on residential rent paid for personal accommodation.
HR professionals suggest reviewing your rent and salary before start of every financial year to maximise tax savings via HRA.
Q: Can I claim HRA if I forget to submit rent receipts to my employer on time?
A: You may claim at year-end in your income tax return by keeping all necessary documents, but instant exemption via payroll is preferable.
Q: Do I need to submit my landlord’s PAN card to employer every year?
A: Yes, if your annual rent crosses Rs 1 lakh. Retain a copy for tax records.
Q: What if I share accommodation with friends roommates?
A: Submit rental agreement with all names and pay your share of rent via bank for proof. Each employee can claim HRA separately as per their share.
Q: Can HRA and LTA be claimed together?
A: Yes, both can be claimed if your salary structure includes these allowances and conditions are met.
Q: What if I relocate from metro to a non-metro city mid-year?
A: HRA exemption will be calculated proportionately based on months spent in metro vs non-metro location.
Q: Are there online platforms to compare HRA eligible rental properties?
A: Yes, websites and apps like NoBroker, MagicBricks offer rental comparison and even rent receipt generation for HRA claims.
Sources:
Income Tax Rules Section 10(13A)
Income Tax Section 80GG
Naukri CTC Structure
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Written by Prem Anand, a content writer with over 10+ years of experience in the Banking, Financial Services, and Insurance sectors.
Prem Anand is a seasoned content writer with over 10+ years of experience in the Banking, Financial Services, and Insurance sectors. He has a strong command of industry-specific language and compliance regulations. He specializes in writing insightful blog posts, detailed articles, and content that educates and engages the Indian audience.
The content is prepared by thoroughly researching multiple trustworthy sources such as official websites, financial portals, customer reviews, policy documents and IRDAI guidelines. The goal is to bring accurate and reader-friendly insights.
This content is created to help readers make informed decisions. It aims to simplify complex insurance and finance topics so that you can understand your options clearly and take the right steps with confidence. Every article is written keeping transparency, clarity, and trust in mind.
Based on Google's Helpful Content System, this article emphasizes user value, transparency, and accuracy. It incorporates principles of E-E-A-T (Experience, Expertise, Authoritativeness, Trustworthiness).
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