How to claim HRA with rent receipts
The HRA exemption under Section 10(13A) is the least of three amounts: the actual HRA received, rent paid minus 10% of salary, and 50% of salary in Delhi, Mumbai, Kolkata or Chennai or 40% elsewhere. It is available only to salaried employees whose pay includes HRA, and only under the old tax regime. Rent receipts are the primary evidence, and the landlord's PAN becomes mandatory once rent for the year exceeds ₹1,00,000.
The exemption is the lowest of three numbers
This is where most miscalculations start. People assume the exemption equals the rent they paid, or the HRA their employer gave them. It is neither. Section 10(13A) exempts the least of three separately computed amounts, so the smallest one controls.
The three are: the actual HRA received during the year; the rent you actually paid minus 10% of your salary; and 50% of salary if you live in Delhi, Mumbai, Kolkata or Chennai, or 40% of salary anywhere else.
Salary here has a specific meaning. It is basic pay, plus dearness allowance to the extent it forms part of retirement benefits, plus any commission that is a fixed percentage of turnover. Other allowances do not enter the figure, which is why using gross salary inflates the result and produces a number the department will not accept.
A worked example
Basic pay ₹60,000 a month with no DA, HRA ₹24,000 a month, rent paid ₹25,000 a month, living in Bengaluru. Annual salary for HRA purposes is ₹7,20,000.
| The three limbs | Computation | Amount |
|---|---|---|
| Actual HRA received | ₹24,000 × 12 | ₹2,88,000 |
| Rent paid less 10% of salary | ₹3,00,000 − ₹72,000 | ₹2,28,000 |
| 40% of salary (non-metro) | 40% of ₹7,20,000 | ₹2,88,000 |
The least of the three is ₹2,28,000, so that much is exempt and the remaining ₹60,000 of HRA is taxable. Had the same person lived in Mumbai, the third limb would be ₹3,60,000, which would not change the answer, because the second limb is still the lowest.
What a rent receipt needs to contain
A receipt that omits these is the usual reason an employer disallows the claim while computing TDS.
- Your name as the tenant and the landlord's name.
- The amount of rent and the period it covers.
- The full address of the rented property.
- The landlord's signature.
- A ₹1 revenue stamp, where rent was paid in cash and the receipt is for more than ₹5,000.
- The landlord's PAN, once the rent you pay in the year exceeds ₹1,00,000 in aggregate.
The ₹1 lakh PAN threshold, and what happens without it
Once aggregate rent for the year crosses ₹1,00,000, which is only about ₹8,334 a month, you have to report the landlord's PAN. It goes into Form 12BB, the declaration you give your employer for claiming exemptions.
Without the PAN above that threshold, the employer can decline to give effect to the exemption while deducting TDS, and the HRA is simply taxed as salary. Some landlords resist giving a PAN precisely because it makes the rent visible as their income. That is their problem to manage, not a reason the exemption bends: the requirement is on you to report it.
Paying rent to a parent is allowed, and reasonably common, but it has to be real. There should be an actual transfer of rent, the parent should own the property, and the parent should report the rent as their income. A paper arrangement with no money moving is the kind of claim that does not survive scrutiny.
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HRA FAQ
How is the HRA exemption calculated?
It is the least of three amounts: the actual HRA received, rent paid minus 10% of salary, and 50% of salary for Delhi, Mumbai, Kolkata or Chennai or 40% of salary elsewhere. Salary for this purpose means basic pay plus dearness allowance that forms part of retirement benefits plus commission at a fixed percentage of turnover.
Can I claim HRA under the new tax regime?
No. The HRA exemption under Section 10(13A) is not available under the new regime of Section 115BAC, which applies by default. You have to be on the old regime to claim it, so compare the two outcomes before choosing.
Is my landlord's PAN compulsory for claiming HRA?
It becomes mandatory once the rent you pay during the year exceeds ₹1,00,000 in aggregate, and it is reported in Form 12BB. Below that, rent receipts are enough. Without the PAN above the threshold, your employer may refuse the exemption while computing TDS on your salary.
Which cities count as metro for HRA?
Only Delhi, Mumbai, Kolkata and Chennai, where the third limb is 50% of salary. Every other city, including Bengaluru, Hyderabad, Pune, Gurugram and Noida, is non-metro and takes 40%.
Do I need a revenue stamp on my rent receipt?
A ₹1 revenue stamp is expected where the rent was paid in cash and the receipt is for more than ₹5,000. Payments made by bank transfer or UPI leave their own trail, and the bank record supports the receipt.
Can I claim HRA for rent paid to my parents?
Yes, provided the arrangement is genuine. The parent should own the property, the rent should actually be paid, and the parent should declare it as income in their own return. An arrangement that exists only on paper is a common target during assessment.
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Provisions referred to
- The Income-tax Act, 1961 — Section 10(13A) (house rent allowance)
- The Income-tax Rules, 1962 — Rule 2A (limits for Section 10(13A)) and Form 12BB
- The Income-tax Act, 1961 — Section 115BAC (new tax regime)
This is general information about Indian tax law, not tax advice. Thresholds and regime rules change with each Finance Act and your own position depends on your salary structure. Confirm the current position on incometax.gov.in or with a qualified chartered accountant.