HRA Exemption and Rent Receipts: Save Tax
If you live in a rented home and get House Rent Allowance in your salary, the HRA exemption can cut your income tax meaningfully, often by tens of thousands a year. But it is only available under the old tax regime, and you must claim it correctly with the right proof. This guide explains how the HRA exemption works in 2026, how much you can claim, and the rent receipt rules.
How much HRA you can claim
The exempt HRA is the lowest of these three amounts:
- The actual HRA you receive from your employer.
- 50 percent of your basic salary if you live in a metro (Delhi, Mumbai, Kolkata, Chennai), or 40 percent if you live in a non-metro.
- Actual rent paid minus 10 percent of your basic salary.
Whichever of these three is smallest is your exemption. So the benefit depends on your salary structure, your city, and your actual rent. If you pay little or no rent, or your HRA component is small, the exemption shrinks accordingly.
A worked example
Take someone in Delhi with a basic salary of ₹50,000 a month, HRA of ₹20,000, paying rent of ₹18,000. The three figures are: actual HRA ₹20,000; 50 percent of basic ₹25,000; rent minus 10 percent of basic, ₹18,000 minus ₹5,000, so ₹13,000. The lowest is ₹13,000 a month, or ₹1.56 lakh a year, exempt from tax. At a 30 percent tax slab, that saves roughly ₹47,000 in tax for the year, a real benefit for simply claiming it correctly.
The old regime catch
HRA exemption is available only under the old tax regime. The new regime offers lower slab rates but removes most exemptions, including HRA. So if you pay significant rent, compare the two regimes: the HRA and other deductions under the old regime may beat the lower rates of the new one. Run both before filing, since the right choice depends on your rent, home loan, and other deductions. Our home loan tax benefits guide covers the deductions that also favour the old regime.
Rent receipt and proof rules
- Rent receipts: keep monthly or periodic receipts with the amount, date, and landlord details.
- Landlord PAN: if your annual rent exceeds ₹1 lakh, you must report the landlord's PAN to your employer.
- Rent agreement: a proper agreement supports your claim, our rent agreement guide covers it.
- Bank transfer: paying rent by bank transfer creates a clean trail, better than cash.
- Paying rent to family: allowed if it is genuine, with a real agreement and actual payments, but the family member must report it as income.
Old regime versus new regime for renters
Because HRA exists only in the old regime, a renter's regime choice can swing their tax bill by tens of thousands. Consider the earlier example, a ₹13,000 a month exemption is ₹1.56 lakh a year, worth about ₹47,000 in tax at the 30 percent slab. Add a home loan, 80C investments, and other deductions, and the old regime's total shelter can comfortably beat the new regime's lower rates. But for a renter with a small HRA component, little rent, and few other deductions, the new regime's lower slabs may win outright. There is no universal answer: the right regime depends on your rent, HRA, home loan, and investments taken together. The practical step is to compute your tax both ways each year before filing, since your rent and deductions change, and the better regime can flip from one year to the next.
Frequently asked questions
How is HRA exemption calculated?
It is the lowest of your actual HRA, 50 percent of basic salary in a metro (40 percent non-metro), and actual rent minus 10 percent of basic salary. The smallest figure is exempt.
Is HRA exemption available in the new tax regime?
No. HRA exemption is only under the old regime. The new regime has lower rates but removes HRA and most other exemptions, so compare both before filing.
Do I need my landlord's PAN for HRA?
Yes, if your annual rent exceeds ₹1 lakh, you must report the landlord's PAN to your employer to claim the exemption.
Can I claim HRA if I pay rent to my parents?
Yes, if it is a genuine arrangement with a real agreement and actual payments. Your parent must report the rent as income in their return.
What proof do I need to claim HRA?
Rent receipts with amount and landlord details, a rent agreement, and the landlord's PAN if rent exceeds ₹1 lakh a year. A bank transfer trail strengthens the claim.
Can I claim HRA and a home loan together?
Yes, in certain situations, for example if you rent in one city and own a home in another, or your own home is genuinely let out. The specifics must fit the rules, so check with a tax advisor.
The HRA exemption can save real tax, up to tens of thousands a year, but only under the old regime and only with proper proof. Calculate the lowest of the three amounts, keep your receipts and landlord PAN, and compare the two regimes before filing. Read more finance guides on our blog. Rules are current for 2026, so confirm specifics with a tax advisor.
