HRA Exemption Guide

How HRA exemption is calculated

Rule 2A states that the exempt amount is the least of the following: the actual HRA received; rent paid minus 10 percent of salary; and 50 percent of salary for accommodation in Mumbai, Kolkata, Delhi, or Chennai or 40 percent of salary for other places.

The department's salaried-benefits summary also clarifies the salary base commonly used for this purpose: basic salary, dearness allowance if it enters retirement benefits, and turnover-based commission.

When HRA becomes fully taxable

The department summary says HRA is fully taxable if the employee lives in their own house or does not pay rent. That means a salary structure showing HRA does not by itself guarantee exemption.

The portal FAQ on tax regimes separately states that HRA exemption is not available in the new regime.

Documents and reporting points to remember

The department summary also states that the employee must report the landlord's PAN to the employer if annual rent is more than Rs. 1,00,000. In practice, rent receipts, rent agreement details, and accurate payroll declarations remain important for HRA claims.

• Rent should actually be paid
• Own house or no rent means no HRA exemption
• Landlord PAN is required where annual rent exceeds Rs. 1,00,000
• The new regime does not allow HRA exemption