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Complete Guide to HRA Tax Exemption (Section 10(13A))

Understand how House Rent Allowance (HRA) exemption works under the Old and New Tax Regimes for Financial Year 2025-26 & Assessment Year 2026-27.

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1. What is Section 10(13A) of the Income Tax Act?

Section 10(13A) of the Indian Income Tax Act provides tax relief to salaried individuals who incur rental expenditures on residential accommodation. The exemption is available only to taxpayers who opt for the Old Tax Regime. Under the New Tax Regime (Section 115BAC), HRA exemption is not available.

2. The Three-Point Statutory Exemption Formula

Statutory Rule 2A Formula:

Your tax-exempt HRA is strictly the MINIMUM of these 3 figures:

Actual HRA received: As stated on your monthly salary slip.
50% of Basic Salary + DA: For employees living in Delhi, Mumbai, Kolkata, or Chennai (Metro cities). 40% of Basic Salary + DA for all other cities (Non-Metro).
Rent Paid minus 10% of Basic Salary + DA: (Total Annual Rent Paid) - (10% × Annual Basic Salary).

3. Step-by-Step Calculation Example

Let's consider an employee in Bangalore (non-metro) with the following annual package:

Basic Salary: ₹6,00,000 / year (₹50,000 / month)
Actual HRA Received: ₹2,40,000 / year (₹20,000 / month)
Actual Rent Paid: ₹2,64,000 / year (₹22,000 / month)

Condition	Calculation Formula	Calculated Amount
1. Actual HRA	₹20,000 × 12	₹2,40,000
2. 40% of Basic (Bangalore)	40% × ₹6,00,000	₹2,40,000
3. Rent minus 10% Basic	₹2,64,000 - ₹60,000	₹2,04,000

Result: The minimum of the three amounts is ₹2,04,000. This entire ₹2,04,000 is 100% exempt from income tax! The remaining ₹36,000 (₹2,40,000 - ₹2,04,000) will be added to taxable salary.

4. Crucial Rules Every Taxpayer Must Know

Rent Exceeding ₹1,00,000 per Year: CBDT rules mandate that Landlord PAN is strictly required if total annual rent exceeds ₹1,00,000.
Cash Payments over ₹5,000: Affix a ₹1 revenue stamp on each monthly receipt and ensure the landlord signs across the stamp.
Paying Rent to Parents: Fully legal. Ensure bank records demonstrate financial transfer, generate monthly rent receipts, and ensure parents declare this rental income in their respective ITR.
Paying Rent to Spouse: Not permitted under Income Tax precedent (spouses are expected to live together as domestic partners, and tax tribunals frequently reject rental claims between spouses).

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Tax Editorial Desk • Researched & Fact-Checked Last updated: March 15, 2026 (Applicable for FY 2025-26 / AY 2026-27)

Statutory Tax Disclaimer: This guide and our HRA calculation tools provide general informational guidance aligned with Section 10(13A) and Rule 2A of the Income Tax Rules. They do not constitute certified legal, tax, or financial advice. For specific tax disputes, multi-city rent splitting, or complex tax assessments, please consult a certified Chartered Accountant (CA).