Question 1

How is HRA exemption calculated under Section 10(13A)?

Accepted Answer

HRA exemption is the minimum of three components: (1) actual HRA received from your employer, (2) annual rent paid minus 10% of your basic salary, and (3) 50% of basic salary for metro cities (Delhi, Mumbai, Chennai, Kolkata) or 40% for non-metro cities. The least of these three is exempt from tax; the remaining HRA is taxable.

Question 2

Which cities are classified as metro for HRA exemption?

Accepted Answer

For the purpose of HRA exemption under Section 10(13A), only four cities are classified as metro: Delhi, Mumbai, Chennai, and Kolkata. All other cities, regardless of size or population, are classified as non-metro and qualify for the 40% basic salary rule instead of 50%.

Question 3

Can I claim HRA exemption if I pay rent to my parents?

Accepted Answer

Yes, you can claim HRA exemption for rent paid to your parents, provided it is a genuine arrangement. Your parent must show the rent as income in their tax return, and you should have a rent agreement and proof of payment (bank transfer preferred). However, you cannot claim HRA for rent paid to your spouse.

Question 4

What documents are needed to claim HRA exemption?

Accepted Answer

You need rent receipts (signed by your landlord), a rent agreement, and proof of payment. If your annual rent exceeds ₹1 lakh, you must provide your landlord's PAN. Bank transfer records are stronger proof than cash receipts. Submit these to your employer via Form 12BB at the start of the financial year for TDS adjustment.

Question 5

Can I claim both HRA exemption and home loan interest deduction?

Accepted Answer

Yes, you can claim both simultaneously if you meet the conditions for each. This commonly applies when you own a home in one city (and claim home loan interest under Section 24) but work and rent in another city. Even in the same city, you can claim both if your owned property is not suitable for your occupation (e.g., rented out or under construction).

Question 6

What happens if my rent is less than 10% of my basic salary?

Accepted Answer

If your annual rent is less than 10% of your annual basic salary, the "rent minus 10% of basic" component becomes negative, making it the minimum of the three. Since the exemption cannot be negative, your HRA exemption is zero — all your HRA will be fully taxable. This typically happens when your rent is very low relative to your salary.

Question 7

Is HRA exemption available under the new tax regime?

Accepted Answer

No. HRA exemption under Section 10(13A) is not available if you opt for the new tax regime. Under the new regime, your entire HRA is taxable as part of salary. This is one of the key deductions lost when choosing the new regime, and should be factored into your old vs new regime comparison.

HRA Exemption Calculator — Section 10(13A)