Your 2025 guide to HRA exemption—eligibility, calculation, documents, and tax-saving tips for salaried individuals in rented accommodation.
Looking to save on taxes while living in a rented house? The House Rent Allowance (HRA) exemption allows salaried employees in India to claim a tax deduction on the rent they pay, provided certain conditions are met. As per Section 10(13A) of the Income Tax Act, 1961, the HRA component in your salary can be partially or fully exempted from tax—based on factors such as your salary, rent paid, and city of residence. This guide covers everything you need to know about HRA exemption in 2025.
What is House Rent Allowance (HRA)?
HRA is a salary component provided by employers to help employees cover housing costs. It’s either transferred directly to your salary account or paid separately and is applicable only if you live in rented accommodation. The allowance varies depending on your salary, job location, and years of service.
It is strictly meant for housing expenses—other bills like groceries or electricity are not covered. If used right, HRA can significantly reduce your taxable income.
Eligibility Criteria for HRA Exemption
To claim HRA exemption, the following conditions must be met:
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You must be a salaried individual with an HRA component in your salary.
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You must live in rented accommodation and pay rent.
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You need to submit rent receipts and relevant documents.
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If rent paid exceeds ₹1 lakh annually, the landlord’s PAN must be provided.
📌 Self-employed individuals can’t claim HRA under Section 10(13A) but can claim deductions under Section 80GG if conditions are met.
How is HRA Exemption Calculated?
The HRA tax exemption is the least of the following:
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Actual HRA received from the employer.
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Rent paid minus 10% of basic salary.
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50% of basic salary if living in a metro city (Delhi, Mumbai, Kolkata, Chennai); 40% for non-metro cities.
✅ Example Calculation:
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Basic salary: ₹6,00,000/year
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Rent paid: ₹15,000/month
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HRA received: ₹12,000/month
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City: Bangalore (non-metro)
The exemption is the minimum of:
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Actual HRA received: ₹1,44,000
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Rent paid – 10% of salary: ₹1,80,000 – ₹60,000 = ₹1,20,000
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40% of basic salary: ₹2,40,000
HRA exemption = ₹1,20,000
🎯 Try the free HRA Calculator by Vakilsearch for instant results based on your salary and rent details.
Documents Required for HRA Exemption
To claim the exemption, you’ll need:
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Rent receipts and rental agreement
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PAN card of landlord (if rent > ₹1 lakh/year)
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Identity proof of both tenant and landlord
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Address proof like utility bill or Aadhaar
Make sure to keep all documents handy while filing your ITR or submitting them to your employer during the year-end tax declaration.
Tax Benefits of HRA
HRA provides substantial tax benefits:
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Reduces taxable salary, leading to lower tax liability.
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Can be claimed even if you pay rent to parents, as long as a valid rent agreement and payments are made.
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Dual benefit possible: HRA exemption + Home Loan interest deduction under Section 24 if you own a home in another city.
Conclusion
HRA exemption is a powerful tool for salaried individuals to reduce their taxable income and maximize savings. Whether you’re in a metro city or a smaller town, understanding how the exemption is calculated and the documents required can help you plan better. Use an HRA calculator or consult with a tax expert to ensure you’re making the most of this benefit in 2025.
💡 Need help? Vakilsearch offers expert assistance and a free HRA calculator to simplify your tax planning.
FAQs
What are the 3 Essential conditions for HRA exemption?
The three essential conditions for HRA exemption are: the employee must be a salaried individual, have the HRA component in their salary structure, and stay in a rented accommodation.
How much HRA exemption can I claim in India?
The amount of HRA exemption you can claim in India depends on the actual HRA received, rent paid annually reduced by 10% of salary, 50% of basic salary (if you live in a metro city), and 40% of basic salary (if you live in a non-metro city). The least of these amounts is considered for deduction.
How Can we claim 100% HRA?
You can claim 100% HRA if you pay rent for your residential accommodation and meet the eligibility criteria for HRA exemption. The exemption on HRA is the minimum of the actual HRA received, rent paid annually reduced by 10% of salary, 50% of basic salary (if you live in a metro city), and 40% of basic salary (if you live in a non-metro city).
What is the Online HRA limit for 2025?
There is no specific online HRA limit for 2025. The HRA exemption limit is determined based on the actual HRA received, rent paid annually reduced by 10% of salary, 50% of basic salary (if you live in a metro city), and 40% of basic salary (if you live in a non-metro city).
Can I claim HRA without a rent receipt?
No, you cannot claim HRA without a rent receipt. To claim an HRA exemption, you need to submit proof of rent receipts to your employer or while filing your income tax return.
