How to Claim HRA While Filing ITR – Complete Process FY 2025-26

HRA exemption is genuinely one of the most valuable, widely-applicable tax benefits for salaried employees, yet the exact calculation and documentation requirements trip up many first-time claimants — particularly around the three-way "lowest of" formula and special scenarios like paying rent to family members. This guide walks through the complete filing process, plus how HRA interacts with home loan tax benefits if you own property elsewhere.

This page covers:

• Understanding HRA and how the exemption is calculated
• Eligibility criteria for claiming HRA
• Step-by-step process to claim HRA while filing your ITR
• Special cases — paying rent to family, owning a house elsewhere
• How HRA and home loan tax benefits work together
• Budget 2026 context on potential HRA changes

House Rent Allowance (HRA) is a significant part of the salary for many employees, especially those living in rented accommodation. It provides tax benefits under Section 10(13A) of the Income Tax Act, 1961. Understanding how to claim HRA while filing your ITR can lead to substantial tax savings, ensuring you make the most of your eligible deductions.

HRA is an allowance paid by employers to employees for covering their rental accommodation expenses. It's partially or wholly exempt from taxes under specific conditions, with the exemption calculated based on the least of the following:

1. Actual HRA received
2. 50% of salary (basic + DA) for those living in metro cities (40% for non-metro cities)
3. Rent paid minus 10% of salary (basic + DA)

To claim HRA, you must:

• Be living in rented accommodation
• Be receiving HRA as part of your salary package
• Be paying rent to a landlord and not owning the accommodation

If these conditions are met, you can proceed to claim the HRA exemption while filing your ITR.

1. Collect rent receipts and rental agreement: Ensure you have rent receipts and a rental agreement as proof of rent payment, including details such as the landlord's name, address, rent amount, and payment date
2. Calculate HRA exemption: Use the least of the three criteria mentioned above to calculate your HRA exemption, determining how much of your HRA is exempt from tax
3. Verify Form 16: Your employer provides Form 16, including details of your salary, HRA received, and tax deducted at source (TDS) — verify the HRA amount shown in this form
4. Enter details in ITR Form: Choose the correct ITR form — salaried individuals can select ITR-1 or ITR-2, depending on their income sources
5. Submit proof if necessary: If your employer hasn't accounted for your HRA exemption, or if you're filing ITR independently, keep rent receipts and rental agreement ready — the Income Tax Department may request these documents for verification

Important: If your annual rent exceeds Rs. 1 lakh, you must provide your landlord's PAN as part of your claim documentation.

Rent paid to family members: You can pay rent to your parents or siblings, provided they own the property. Ensure the rental arrangement is genuine, with rent receipts and bank transactions as proof — this is a legitimate strategy but requires careful documentation to withstand scrutiny.

Own house and claiming HRA: If you own a house in a different city and live in rented accommodation for work purposes, you can still claim HRA — a scenario that becomes particularly relevant when combined with home loan benefits (see below).

If you have a home loan, you can claim both HRA and home loan interest deduction under Section 24(b), plus principal repayment under Section 80C. This is beneficial if you have a house in one city but live in rented accommodation in another due to work.

Worked example: If you've taken a home loan from Bajaj Finance for a property in your hometown, but work in a different city requiring rented accommodation, you can claim HRA for your rented accommodation and simultaneously claim deductions for your home loan interest and principal repayment — a genuinely powerful combined tax-saving strategy for professionals relocated for work.

Budget 2026 is expected to bring significant reforms to India's income tax system, with the government preparing to replace the old Income Tax Act of 1961 with the new Income Tax Act, 2025, effective from 1 April 2026. This shift aims to simplify complex tax provisions and reduce lengthy sections.

There's strong anticipation around HRA rules and Section 80C limits specifically — many experts expect possible revisions to HRA benefits to better match rising rental costs in metro and non-metro cities, though these remain proposals until formally confirmed. Stay updated through official government channels rather than assuming specific changes before they're enacted.

All upcoming amendments announced in Budget 2026 will be made directly to the 2025 Act instead of the older law, designed to create a clearer, more structured tax framework overall. For salaried employees currently claiming HRA, this transition period is worth monitoring closely — while your fundamental right to claim HRA exemption isn't expected to disappear, the specific percentages, thresholds, or documentation requirements could see refinement as the new Act takes shape. Checking official Income Tax Department announcements closer to the April 2026 implementation date will give you the clearest picture of exactly what changes to expect for your specific filing.

Planning to purchase your own home while maximising your tax benefits? Bajaj Finance offers home loans with competitive interest rates starting from 7.25% p.a.* and loan amounts up to Rs. 15 Crore*. Check your eligibility for a home loan from Bajaj Finance today.

Understanding the complete HRA claiming process — from the three-way exemption calculation to special scenarios like family rent payments and combined home loan benefits — ensures you capture the full tax savings you're entitled to each year.