## House Rent Allowance — Section 10(13A)

HRA exemption is available only under the Optional (old) Tax Regime. The exempt amount is the least of three figures, and the limits differ for metro vs non-metro cities.

### The three amounts (take the LEAST)

	Metro cities (Delhi, Kolkata, Mumbai, Chennai — D, K, M, C)	Other cities
1	HRA actually received for the relevant period	HRA actually received for the relevant period
2	Rent paid − 10% of salary for the relevant period	Rent paid − 10% of salary for the relevant period
3	50% of salary for the relevant period	40% of salary for the relevant period

The only difference between metro and non-metro is the 3rd figure: 50% vs 40% of salary.

### Meaning of 'Salary' for HRA

> Salary = Basic Salary + D.A. (to the extent it forms part of retirement benefits) + Commission (as a fixed % of turnover)

### Conditions for claiming the exemption

1. Available only under the Optional Tax Regime.

2. Not available if the taxpayer: (a) lives in their own house, or (b) has not actually paid rent (no rent expenditure incurred).

3. Available only for the relevant period during which rented accommodation is actually occupied — compute period-wise whenever rent, salary or HRA changes during the year.

Worked example

### Example 1

Metro computation. An employee in Mumbai (OTR) earns Basic ₹40,000 p.m., DA ₹10,000 p.m. (forming part of retirement benefits), receives HRA ₹18,000 p.m. and pays rent ₹20,000 p.m. — for the full year. Salary p.m. = 40,000 + 10,000 = ₹50,000. Least of: (1) HRA received 18,000×12 = ₹2,16,000; (2) Rent − 10% salary = (20,000 − 5,000)×12 = ₹1,80,000; (3) 50% of salary = 25,000×12 = ₹3,00,000. Exempt = ₹1,80,000 (the least); taxable HRA = 2,16,000 − 1,80,000 = ₹36,000.

### Example 2

Period-wise computation. If salary, rent or HRA changes mid-year, or the employee occupies rented accommodation for only part of the year, the three amounts must be computed separately for each period and summed — never average the whole year.

⚠️ Common exam mistakes

Applying 50% of salary for a NON-metro city — only Delhi, Kolkata, Mumbai and Chennai get 50%; all others get 40%.
Including DA that does NOT form part of retirement benefits, or commission that is not a fixed % of turnover, in 'salary'.
Granting the exemption when the employee lives in their own house or pays no rent.
Computing on a full-year basis when rent/salary/HRA changed during the year — exemption must be computed period-wise.

Reference: Section 10(13A) — Income-tax Act, 1961

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House Rent Allowance [Section 10(13A)]

Worked example

⚠️ Common exam mistakes