HRA
Also called: House Rent Allowance, house rent allowance
What is HRA?
House rent allowance is a salary component paid toward rented accommodation. Under the old tax regime a portion is exempt from income tax, subject to conditions based on rent paid, salary and city.
Why HRA matters
HRA is one of the larger exemptions available to salaried employees who rent, which makes it central to structuring pay tax-efficiently under the old regime.
HRA formula
Exemption = least of (HRA received, Rent − 10% of salary, 50% or 40% of salary)
Salary here means basic plus dearness allowance.
How HRA works in practice
The exemption is the least of three amounts: actual HRA received, rent paid less 10% of salary, and 50% of salary in metro cities or 40% elsewhere. Rent receipts and, above a threshold, the landlord's PAN are needed.
Frequently asked questions
The HRA exemption is available under the old regime; the new regime trades exemptions for lower slab rates.