HRA Exemption Under Section 10(13A) — Complete Guide for FY 2025-26
House Rent Allowance (HRA) is one of the most valuable tax exemptions available to salaried employees in India — but only under the Old Tax Regime. Understanding exactly how Section 10(13A) calculates the exemption can save you tens of thousands of rupees per year. This guide explains the three-condition formula, metro vs non-metro rules, and how to maximise your HRA benefit.
The Three-Condition Formula for HRA Exemption
Your HRA exemption under Section 10(13A) is the minimum of these three amounts:
Condition 2: 50% of basic salary (metro) or 40% (non-metro)
Condition 3: Actual rent paid − 10% of basic salary
HRA Exemption = MIN(Condition 1, Condition 2, Condition 3)
The remaining HRA (received minus exempt) becomes fully taxable income. The calculator above shows all three values and highlights which condition is limiting your exemption.
Metro vs Non-Metro — Which Cities Qualify?
| Category | HRA Rate | Cities |
|---|---|---|
| Metro | 50% of Basic | Delhi, Mumbai, Kolkata, Chennai |
| Non-Metro | 40% of Basic | Bengaluru, Hyderabad, Pune, Ahmedabad, and all others |
Note: Bengaluru, Hyderabad and Pune — despite being major metros — are classified as non-metro for HRA purposes under the Income Tax Act. This is a common source of confusion. If you live in any city not listed as metro above, use the 40% rate.
How to Maximise Your HRA Exemption
The most common limiting condition is Condition 3 (rent paid minus 10% of basic). To increase your exemption:
- Pay higher rent: If you're paying below the 50%/40% of basic threshold, paying more rent (genuinely) increases your Condition 3 value
- Negotiate basic salary structure: A higher basic salary increases Condition 2 but also increases the 10% threshold in Condition 3 — check both effects
- Claim rent to parents: Legally allowed if genuine — parents must declare rental income in their ITR
- Keep rent receipts: Monthly receipts with landlord signature; landlord PAN mandatory if annual rent > ₹1 lakh
HRA vs New Tax Regime — What You Lose
The New Tax Regime does not allow HRA exemption. If you're paying ₹20,000/month in rent in a metro city and your basic is ₹40,000/month, your Old Regime HRA exemption could be ₹1.44 lakh per year — worth ₹43,000+ in tax savings at the 30% slab. Use our Tax Comparison Calculator to enter your HRA exemption amount and see exactly how much Old Regime saves you vs New Regime.
Also see: Salary In-Hand Calculator to see your net take-home after all deductions including HRA, PF, and income tax.
Frequently Asked Questions
Common questions about HRA exemption under Section 10(13A) for FY 2025-26.
HRA exemption is the minimum of three values: (1) Actual HRA received from employer, (2) 50% of basic salary for metro cities or 40% for non-metro, and (3) Actual rent paid minus 10% of basic salary. The lowest of these three is your tax-exempt amount. The rest is added to your taxable income. The calculator above shows all three values and which one limits you.
Only 4 cities qualify as metro for HRA under the Income Tax Act: Delhi, Mumbai, Kolkata, and Chennai — all get 50% of basic salary. All other cities, including Bengaluru, Hyderabad, Pune, Ahmedabad, and Jaipur, are treated as non-metro and get 40% of basic salary. This is a common mistake — don't use 50% just because you live in a large city.
Yes, paying rent to parents is legally allowed and commonly used for HRA claims — but the arrangement must be genuine. Your parents must declare the rent as income in their ITR. A proper rent agreement and monthly receipts are advisable. You cannot claim HRA for a property you own or co-own. The tax department may scrutinise such arrangements, so maintain clear documentation.
Monthly rent receipts signed by the landlord (revenue stamp if rent exceeds ₹5,000/month). PAN of landlord is mandatory if annual rent exceeds ₹1 lakh — without this, your employer will deduct TDS on the full HRA. A rent agreement is highly advisable. Submit all documents to your employer by January–February to ensure the TDS adjustment is reflected in your Form 16.
No. HRA exemption under Section 10(13A) is not available under the New Tax Regime. If you pay significant rent — especially in metro cities — this is often the primary reason the Old Regime saves more tax for you. For example, a ₹20,000/month rent in Mumbai with ₹40,000/month basic salary could give you ₹1.44 lakh annual HRA exemption, worth ₹43,000+ in tax savings at the 30% slab. Use our Tax Calculator to compare both regimes with your HRA number.