How to Claim HRA in India: Learn how to claim House Rent Allowance (HRA) exemption in India for FY 2025–26. Understand eligibility, calculation formula, required documents, examples, and common mistakes—explained simply for beginners.
Last Updated: April 2026
Applicable For: FY 2025–26 (AY 2026–27)
Why HRA Feels Confusing
If you’re a salaried employee in India, you’ve probably seen “HRA” on your salary slip. You may also have heard that it can reduce your tax—sometimes significantly.
Yet when it’s time to submit rent receipts or file your income tax return, uncertainty often appears.
Am I eligible?
How is it calculated?
What if I forgot to submit proofs?
Does it work under the new tax regime?
These are reasonable questions. Tax rules are often explained in fragments, not as a coherent whole. This guide on How to Claim HRA in India is written to provide calm clarity. No shortcuts. No exaggeration. Just a step-by-step explanation so you understand what applies to you.
What People Commonly Hear vs What’s Actually True
What You Often Hear
- “HRA is completely tax-free.”
- “You can claim any rent amount and reduce tax.”
- “If you missed submitting rent proofs to your employer, it’s over.”
- “Everyone can claim HRA.”
These statements circulate frequently, especially during tax season.
What’s More Accurate
- HRA is partially exempt, not fully tax-free.
- The exemption is calculated using a specific formula.
- You can still claim HRA while filing your Income Tax Return (ITR), even if you missed employer submission.
- Only salaried employees receiving HRA under the old tax regime can claim it.
Understanding the structure removes most of the confusion.
How to Claim HRA in India: The Step-by-Step Explanation
To claim HRA correctly, you need to understand four key elements:
- Eligibility
- The calculation formula
- Required documents
- Where and how to claim
Let’s take them one at a time.
1. What Is HRA and Who Can Claim It?
House Rent Allowance (HRA) is a salary component paid by an employer to help cover rental housing expenses.
The exemption is governed by Section 10(13A) of the Income Tax Act.
You Can Claim HRA If:
- You are a salaried employee
- HRA is part of your salary structure
- You live in a rented accommodation
- You pay rent regularly
- You opt for the old tax regime
You Cannot Claim HRA If:
- You are self-employed
- You do not receive HRA in your salary
- You live in your own house
- You choose the new tax regime
The distinction between tax regimes is important. HRA exemption is not available under the new regime.
2. How HRA Exemption Is Calculated
This is where most confusion begins.
The exemption is calculated as the lowest of the following three amounts:
- Actual HRA received
- 50% of salary (metro cities) or 40% (non-metro cities)
- Rent paid minus 10% of salary
What Counts as Salary?
For HRA calculation, “salary” generally includes:
- Basic salary
- Dearness allowance (if considered for retirement benefits)
It does not include bonuses, incentives, or other allowances.
Think of this formula as a safety cap. The government limits how much of your HRA can be exempt to ensure fairness and consistency.
3. A Practical HRA Calculation Example (FY 2025–26)
Let’s use a realistic example.
Rohit, working in Delhi (a metro city):
- Basic Salary: ₹45,000 per month
- HRA Received: ₹22,000 per month
- Rent Paid: ₹20,000 per month
Annual Figures
- Salary: ₹5,40,000
- HRA Received: ₹2,64,000
- Rent Paid: ₹2,40,000
Now Calculate the Three Conditions
- Actual HRA received: ₹2,64,000
- 50% of salary (metro): ₹2,70,000
- Rent paid minus 10% of salary:
₹2,40,000 – ₹54,000 = ₹1,86,000
The lowest amount is ₹1,86,000.
So, ₹1,86,000 is exempt.
The remaining ₹78,000 of HRA becomes taxable income.
The formula may seem mechanical, but once you walk through it once, it becomes manageable.
4. Documents Required to Claim HRA
Proper documentation protects you in case of scrutiny.
Essential Documents
- Rent receipts
- Landlord’s name and address
- Landlord’s PAN (mandatory if annual rent exceeds ₹1,00,000)
Recommended Documents
- Rental agreement
- Bank statements showing rent payment
If the landlord does not have a PAN, a written declaration may be required.
The system does not usually require uploading documents while filing ITR, but you must retain them.
5. Claiming HRA: Through Employer vs While Filing ITR
You can claim HRA in two ways.
Option 1: Through Employer
- Submit rent receipts during the financial year
- Employer calculates exemption
- Lower TDS deducted monthly
- Reflected in Form 16
This improves cash flow throughout the year.
Option 2: While Filing Income Tax Return
If you forgot to submit rent proofs to your employer:
- You can claim HRA directly in your ITR
- TDS may already have been deducted
- Excess tax paid will be refunded
This option corrects earlier oversight but requires accurate self-calculation.
Evidence Layer: Why HRA Remains Relevant
Over the years, tax structures have evolved. The introduction of the new tax regime created choices for salaried employees.
Yet certain patterns remain:
- Employees living in rented accommodation in major cities often benefit significantly from HRA under the old regime.
- The decision between old and new regime depends on overall deductions, not HRA alone.
- Proper documentation reduces risk and increases confidence during filing.
HRA continues to be one of the most meaningful salary-based exemptions for renters in India.
Special Scenarios Explained Clearly
Paying Rent to Parents
This is allowed if:
- Parents own the house
- Rent agreement exists
- Rent is actually paid
- Parents declare rental income in their tax return
It must reflect genuine transaction, not a paper arrangement.
Owning a House in Another City
You can claim HRA if:
- You work in a different city
- You live in rented accommodation due to employment
The key factor is where you reside for work.
No Rent Receipts
Without proof of rent payment, HRA exemption cannot be claimed.
Decision Framework: Should You Claim HRA?
Rather than assuming you should or shouldn’t, consider context.
This May Suit You If…
- You live in rented accommodation
- HRA forms a meaningful part of your salary
- You are comfortable choosing the old tax regime
- You maintain proper documentation
This May Not Be Ideal If…
- You prefer the simplicity of the new tax regime
- Your deductions are minimal overall
- You own the home you live in
The choice between tax regimes is broader than HRA alone. Evaluate your full salary structure before deciding.
Real-Life Scenario: Comparing Tax Regimes
Consider Anita, age 34, living in Bengaluru.
- Basic Salary: ₹6,00,000
- HRA: ₹3,00,000
- Rent Paid: ₹25,000/month
She calculates her eligible HRA exemption and compares total deductions under the old regime with the lower slab rates of the new regime.
After evaluating both, she finds the old regime provides better net benefit because of HRA and other deductions combined.
The decision isn’t emotional. It’s comparative.
Honest Trade-Offs and Limitations
What HRA Does Well
- Reduces taxable salary
- Encourages documented rental transactions
- Provides structured tax relief to salaried renters
What It Does Not Do
- It does not eliminate income tax entirely
- It does not apply under the new tax regime
- It does not benefit self-employed individuals
Where People Often Get Disappointed
- Choosing the new tax regime without comparing outcomes
- Failing to maintain documentation
- Misunderstanding the calculation formula
Most issues arise from incomplete comparison, not unfair rules.
Low-Pressure Action Steps
If you want to approach HRA thoughtfully, consider:
- Reviewing your salary structure to confirm HRA inclusion
- Comparing old vs new tax regime using actual numbers
- Keeping digital copies of rent receipts
- Ensuring landlord PAN is recorded if required
- Calculating exemption once independently to understand the formula
These steps build clarity without rushing decisions.
Conclusion
Understanding How to Claim HRA in India is less about finding a loophole and more about understanding structure. When you know the formula, eligibility rules, and documentation requirements, the process becomes predictable.
Tax planning does not require complexity. It requires awareness and record-keeping.
If you approach HRA with clarity rather than anxiety, it becomes what it was designed to be—a structured, legal way to reduce tax for salaried individuals who live in rented homes.
Author: Hussain
Personal Finance Educator and Writer (Updated for FY 2025–26)
