BooksIQHRA is exempt to the extent of the LEAST of: (a) actual HRA received; (b) rent paid minus 10% of salary; (c) 50% of salary for metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40% for non-metros. Available only under the OLD regime.
Key points
- §10(13A) read with Rule 2A exempts House Rent Allowance to the extent of the LEAST of the following three amounts, computed for the period the rented accommodation is occupied: (1) the ACTUAL HRA received;
- (2) RENT PAID minus 10% of salary;
- (3) 50% of salary where the accommodation is in Delhi, Mumbai, Kolkata or Chennai (metro), else 40% of salary.
- 'SALARY' for this purpose = Basic + Dearness Allowance (only if it forms part of retirement benefits) + commission as a fixed percentage of turnover.
- No exemption is available if the employee lives in their own house or pays no rent.
- PAN of the landlord must be reported if annual rent exceeds ₹1,00,000.
- This exemption is NOT available under the new tax regime (§115BAC).
Reference: §10(13A) ITA 1961 read with Rule 2A — under ITA 2025 (FY 26-27 onwards), this is Sch.III
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