Quick answer: HRA exemption is available only under the old tax regime, and only if you actually pay rent and receive HRA as part of your salary. The exempt amount is the lowest of three figures: actual HRA received, rent paid minus 10% of basic salary, or 50% of basic in a metro (40% elsewhere). If your landlord’s rent exceeds ₹1 lakh a year you must report their PAN. If you pay rent but get no HRA, Section 80GG gives a smaller deduction instead.
The three-part calculation
Your exemption is the lowest of these three:
- Actual HRA received from your employer for the year
- Rent actually paid minus 10% of basic salary (plus dearness allowance, if it forms part of retirement benefits)
- For Tax Year 2026–27, 50% of the defined salary for Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru; 40% elsewhere
A worked example
Basic salary ₹50,000 a month, HRA ₹20,000 a month, rent paid ₹18,000 a month, living in Hyderabad (50% city cap for Tax Year 2026–27).
| Component | Annual figure |
|---|---|
| Actual HRA received | ₹2,40,000 |
| Rent paid (₹2,16,000) minus 10% of basic (₹60,000) | ₹1,56,000 |
| 50% of defined salary | ₹3,00,000 |
| Exempt amount (lowest of the three) | ₹1,56,000 |
| Taxable portion of HRA | ₹84,000 |
Which year you are filing for matters. The eight-city 50% list took effect on 1 April 2026 and applies to Tax Year 2026–27. For earlier years — including the FY 2025–26 return many people are filing now — only Mumbai, Delhi, Kolkata and Chennai counted as metros, and Hyderabad, Bengaluru, Pune and Ahmedabad were capped at 40%. Use the rule for the year the rent was paid, not the rule in force today, and do not apply the expanded list retrospectively.
Documents you need
- Rent receipts, usually monthly or quarterly, signed by the landlord with the amount, period and address.
- Rent agreement, which most employers ask for.
- Landlord PAN if annual rent exceeds ₹1,00,000. If the landlord has no PAN, you need a signed declaration from them with their name and address.
- Proof of payment, ideally bank transfer. Cash rent with only handwritten receipts is the pattern most likely to be questioned.
Paying by bank transfer every month is the single best protection if the claim is ever examined. It creates an independent record that receipts alone do not.
Paying rent to a family member
This is legal and commonly done, but it is also closely scrutinised, so the arrangement must be genuine:
- The property must actually be owned by the family member, not by you.
- Rent must genuinely be paid and supported by reliable records; bank transfers help document payment.
- A proper rent agreement should exist.
- The recipient must declare the rent as income in their own return.
- Rent paid to a spouse needs careful review of ownership, actual payment and the applicable law; do not assume eligibility.
Paying rent to a parent who owns the house and declares the income is acceptable. Creating a paper arrangement with no actual payment is not, and is a common trigger for notices.
If you pay rent but get no HRA: Section 80GG
Self-employed people and salaried employees whose package has no HRA component can claim under Section 80GG instead. The deduction is the lowest of ₹5,000 a month, 25% of total income, or rent paid minus 10% of total income. You must file Form 10BA declaring you pay rent, and neither you, your spouse nor your minor child may own residential property at the place where you work or reside.
The ceiling of ₹60,000 a year makes 80GG far less valuable than HRA, which is why having HRA structured into your salary is worth asking your employer about.
Can you claim HRA and a home loan together?
Yes, and it is legitimate in several situations: your own home is in another city, or it is let out, or it is genuinely not habitable, or your workplace is too far to commute from it. You would claim HRA on the rented home and Section 24(b) interest on the owned one. Claiming both for properties in the same city while living in your own house is what draws scrutiny.
The regime question
HRA exemption disappears entirely under the new tax regime. For someone paying substantial metro rent, that single fact often decides which regime to choose. Work through both before deciding; see our comparison of old vs new tax regime.
Frequently asked questions
Can I claim HRA if I did not submit proof to my employer?
Yes. If your employer deducted TDS without the exemption, you can still claim it while filing your return and receive the difference as a refund, provided you have the documentation.
What if my landlord refuses to share their PAN?
Do not declare that the landlord has no PAN merely because they refuse to share it; obtain truthful documentation and check the applicable reporting requirement. Without either, the claim above ₹1 lakh rent is difficult to sustain.
Is a rent agreement compulsory?
Not strictly by law for the exemption, but almost every employer asks for one, and it is the document that makes the claim credible.
Can I claim HRA for rent paid in a different city?
Yes, if you genuinely live there for work. The rented accommodation should be where you reside.
Last updated September 2026. Tax rules and limits are set by the Income-tax Act and change with each Budget; verify current provisions on incometax.gov.in or with a qualified tax professional. General information, not tax advice.
Sources
Checked against: CBDT — Income-tax Rules 2026, Rule 279, effective 1 April 2026. Rules, fees and rates change — check the official page before you act on anything here.
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