# House Rent Allowance (HRA) – Section 10(13A)

HRA exemption is available only under the old tax regime. The exempt amount is the least of three figures, with different percentages for metro and non-metro cities.

## The three amounts

### Metro cities (Delhi, Kolkata, Mumbai, Chennai)

Least of:

1. HRA actually received for the relevant period

2. Rent paid − 10% of salary for the relevant period

3. 50% of salary for the relevant period

### Other (non-metro) cities

Least of:

1. HRA actually received for the relevant period

2. Rent paid − 10% of salary for the relevant period

3. 40% of salary for the relevant period

> Only difference between metro and non-metro is 50% vs 40% in the third limb.

## Meaning of 'Salary' for HRA

Salary = Basic Salary + Dearness Allowance (forming part of retirement benefits) + Commission (as a fixed % of turnover).

## Important points

Computation is done for the relevant period during which the rented accommodation is occupied (compute month-wise if salary, rent, or city changes).
If the employee lives in own house or pays no rent, the exemption is NIL (limb 2 becomes zero/negative).

Worked example

### Example 1

Metro computation: Mr. R works in Mumbai. Basic = ₹40,000 p.m.; DA (in retirement benefits) = ₹10,000 p.m.; HRA received = ₹20,000 p.m.; Rent paid = ₹25,000 p.m. Salary = ₹50,000 p.m. Least of: (1) HRA ₹20,000; (2) Rent − 10% salary = 25,000 − 5,000 = ₹20,000; (3) 50% salary = ₹25,000. Exempt = ₹20,000 p.m.

### Example 2

Non-metro computation: Same figures but in Jaipur (non-metro). Third limb = 40% of salary = ₹20,000. Least of ₹20,000 / ₹20,000 / ₹20,000 = ₹20,000 p.m. exempt.

### Example 3

No rent paid: An employee living in his own house receives HRA. Limb 2 (Rent − 10% salary) is nil/negative, so the exemption is NIL and the entire HRA is taxable.

⚠️ Common exam mistakes

Using 50% for non-metro cities — only Delhi, Kolkata, Mumbai, Chennai qualify for 50%; others get 40%.
Forgetting to deduct 10% of salary from rent paid in the second limb.
Including the wrong 'salary' — only Basic + DA (in retirement benefits) + commission (% of turnover) count.
Claiming HRA exemption under the new regime, where it is not available.
Not splitting the computation when salary, rent, or city changes during the year.

Bare-Act text Section 10(13A) · Income-tax Act, 1961 read with Rule 2A · click to expand

Section 10(13A): any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee, to such extent as may be prescribed having regard to the area or place in which such accommodation is situated and other relevant considerations.

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Section 10(13A) – House Rent Allowance Exemption

Worked example

⚠️ Common exam mistakes