Section 10(13A) of the Income-tax Act: HRA Exemption Rules

Section 10(13A) exempts the house rent allowance (HRA) in your salary up to a limit. The exempt amount is the least of 3 figures, so a high rent does not always mean a high exemption.

• Test 1: the HRA you receive
• Test 2: rent paid minus 10% of salary
• Test 3: 50% of salary in a metro city, or 40% in other cities
• Cities: 4 metros up to financial year (FY) 2025-26, and 8 metros from FY 2026-27
• Regime: old regime only

• Proof: rent receipts, and the landlord's Permanent Account Number (PAN) when annual rent exceeds Rs. 1 lakh

  
  

Check the exemption each year against your actual rent. Bajaj Finance reviews your salary slips and returns for a home loan, so a correct HRA claim keeps both documents consistent.

Section 10(13A) of the Income Tax Act, 1961 exempts the HRA that an employer pays to meet the rent of a home the employee lives in. The exemption reduces taxable salary. Rule 2A of the Income-tax Rules, 1962 prescribes how much is exempt.

Under the Income Tax Act, 2025, which applies from 1 April 2026, the exemption sits in Schedule III (serial number 11), read with Section 11. Rule 279 of the Income-tax Rules, 2026 sets the limits from Tax Year 2026-27. Returns for FY 2025-26 still follow Section 10(13A) and Rule 2A.

The exempt amount is the least of 3 figures, worked out for each month.

Rule 2A defines salary for these tests as basic pay, dearness allowance that counts for retirement benefits, and commission paid as a fixed percentage of turnover. Bonus, overtime and other allowances stay outside it.

The part of your HRA that is not exempt is taxed as salary. You can claim less than the least of the 3 figures, but never more.

Four cities count as metro for FY 2025-26: Delhi, Mumbai, Kolkata and Chennai. From FY 2026-27, Rule 279 of the Income-tax Rules, 2026 adds Bengaluru, Hyderabad, Pune and Ahmedabad, which takes the list to 8 cities.

Last updated: 14th Oct 2026

Use the list for the year you file. Confirm it against the notified rule before you submit your return.

You cannot claim it in 4 situations: no HRA, no rent, an owned home or the new regime. Section 10(13A) rests on rent actually paid for a home that you do not own.

Self-employed taxpayers receive no HRA, so their route is the Section 80GG deduction, which has its own conditions.

Yes, when you live in a rented home and the home you own is somewhere else. HRA covers the rent for the home you occupy. Section 24(b) covers the interest on the loan for the home you own, up to Rs. 2 lakh a year for a self-occupied home in the old regime.

The trade-off is cash flow. During the overlap you pay rent and the equated monthly instalment (EMI) together, and both claims need the old regime. When you move into the home you bought, the rent stops and the HRA claim stops with it.

Compare 2 totals before you choose: the tax saved by both claims, and the cost of paying rent and EMI at the same time.

Keep 3 documents for each year: the rent agreement, the monthly receipts or bank transfers, and the landlord's PAN when your rent exceeds Rs. 1 lakh a year. That limit is about Rs. 8,333 a month.

Your employer collects these through a declaration form. From 1 April 2026, Form 124 replaces Form 12BB for this purpose, according to two tax guides.

If you pay rent to a parent, the parent must show the rent as income in their return. Keep the agreement and the transfers as proof.

Arjun Rao, 29, works in Hyderabad and earns Rs. 1.5 lakh a month, with a CIBIL Score of 771. His basic pay is Rs. 80,000 a month, his HRA is Rs. 40,000 and his rent is Rs. 45,000. He uses the old regime at the 30% slab.

Formula used: Monthly exemption = least of (HRA received; rent paid − 10% of basic; 50% or 40% of basic).

Hyderabad moves to the 50% limit from 1 April 2026, so the yearly exemption under Section 10(13A) rises by Rs. 60,000. At 30% plus 4% cess, Arjun saves Rs. 18,720 of tax.

Bajaj Finance reviews your salary slips and income tax returns, and your slip lists HRA as one component of pay. A correct HRA claim keeps the return and the slips consistent. HRA ends when you move into a home you own, so plan for the rent and the EMI together during the overlap.

Approval timelines can extend where your slips and your return show different income, or a rent agreement is missing, and minimum income thresholds can differ by city. Check your home loan eligibility before you decide when to move.