HRA Exemption Under Section 10(13A)

The law in one sentence

Section 10(13A) of the Income Tax Act, 1961, read with Rule 2A of the Income Tax Rules, allows a salaried employee who receives House Rent Allowance and actually pays rent to exclude part of that HRA from taxable salary. This only applies under the old tax regime. Under the new regime (default from FY 2023–24 onwards), HRA exemption is not available.

The three-formula minimum

The exempt amount is the least of these three figures, computed for the period during which you actually paid rent:

• Actual HRA received from your employer
• Rent paid minus 10% of basic salary (plus dearness allowance, if it forms part of retirement benefits)
• 50% of basic salary if you live in a metro city, or 40% if you live in a non-metro

Whatever taxable HRA remains after the exemption is added back to your salary and taxed at slab rates. Most salaried employees in India who rent in a Tier-1 city find that the second formula (rent − 10% basic) is the binding one.

Which cities count as "metro"

For HRA purposes, only four cities are metros under Section 10(13A): Mumbai, Delhi, Kolkata, and Chennai. That definition is narrower than people expect. Bengaluru, Hyderabad, Pune, Ahmedabad, and the NCR towns outside Delhi (Gurugram, Noida, Ghaziabad, Faridabad) are notmetros for this calculation — they cap at 40% of basic. Many TDS-deduction errors at year-end come from employers or employees assuming Bengaluru is a metro. It isn't.

Documentation: rent receipts and landlord PAN

Your employer will ask for proof when you submit investment declarations in Q4. The rent receipts should include landlord name, address, your name, the premises address, the period covered, the amount, and a signature. Affix a revenue stamp of ₹1 or more on any cash receipt over ₹5,000 (the stamp threshold under the Indian Stamp Act). Use DD-MM-YYYYdates — that's the convention income-tax processing expects.

If your annual rent exceeds ₹1,00,000, you must report your landlord's PAN to your employer. If the landlord does not have a PAN, a signed declaration plus Form 60 is the documented alternative. Without one or the other, the employer cannot grant the exemption at TDS stage and you'll have to claim it directly in your ITR. The Toolkiya Rent Receipt Generator includes the landlord PAN field and revenue stamp space by default.

Basic salary vs gross salary — don't mix them up

Every formula above uses basic salary, not gross. Basic is the "Basic Pay" line on your payslip — typically 40–50% of CTC. HRA itself, special allowance, LTA, performance bonus, and reimbursements are not part of basic. Plug your gross figure in by mistake and the exemption inflates artificially; the assessing officer will catch it. If your CTC structure includes DA that counts towards retirement benefits, add that to basic before applying the 10% / 40% / 50% multipliers.

What you cannot claim

You can't claim HRA exemption if you don't actually pay rent, if you own the house you live in, or if you pay rent to your spouse (the department disallows this routinely). Paying rent to a parent is allowed, but the parent must declare it as income on their own return and you must have an actual transfer trail — UPI or bank transfer beats cash every time. The Salary Slip Generator helps you keep the basic-vs-HRA split clean for your own records.