# HRA Exemption Explained

> How House Rent Allowance (HRA) exemption works in India, the formula that decides how much is exempt, and the proof you need to claim it.
- **Published**: 2026-08-16
- **Modified**: 2026-08-16
- **Category**: tax-planning
- **URL**: https://www.tldr.money/articles/tax-planning/hra-exemption-explained

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Use this with the full [tax planning in India](/tax-planning) guide and the broader [income tax deductions guide](/articles/tax-planning/income-tax-deductions-guide). HRA mainly helps under the old regime, so check [new vs old tax regime](/articles/tax-planning/new-vs-old-tax-regime-fy2026-27) first.

## What HRA exemption is

House Rent Allowance is a salary component many employers pay. If you actually pay rent, part of that HRA can be exempt from tax. The exemption is not the full HRA; it is the lowest of three calculated values, so the actual benefit depends on your salary structure, rent, and city.

## The three values that decide it

Your exempt HRA is the least of:

1. The actual HRA your employer pays.
2. Your rent paid minus a set percentage of your basic salary.
3. A percentage of your basic salary, higher for metro cities than non-metro cities.

Because it is the lowest of the three, the exemption is capped by whichever factor is smallest for you. Confirm the current percentages, since they are set by rule.

## Who can claim

- You receive HRA as part of your salary.
- You actually pay rent for your accommodation.
- You are filing under the old regime, where HRA exemption applies.

If you do not receive HRA but pay rent, a separate deduction may be available; check current rules.

## Proof you need

- **Rent receipts** for the rent you pay.
- **Rent agreement**, where applicable.
- **Landlord's PAN** when annual rent crosses the prescribed threshold.
- Pay rent through traceable modes where possible.

## How to make the most of it

1. Keep consistent rent receipts through the year.
2. Understand how your basic salary and city affect the formula.
3. Compare your total old-regime deductions, including HRA, against the new regime in the [income tax calculator](/tools/income-tax-calculator).
4. Keep proof ready before the filing rush; see [how to file ITR online](/articles/tax-planning/how-to-file-itr-online).

HRA is often one of the largest deductions for salaried renters, so it can tilt the regime decision. Line it up with your other [deductions](/articles/tax-planning/income-tax-deductions-guide) before you choose.
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