House Rent Allowance (HRA) is one of the most commonly claimed tax exemptions by salaried employees living in rented accommodation. Available only under the old income tax regime, the exemption helps reduce taxable income for those paying rent. With the income tax return (ITR) filing deadline approaching, many salaried taxpayers are looking to maximise deductions available under the old tax regime.Thus, here’s what taxpayers should know before filing their ITRs.
What is HRA?
House Rent Allowance (HRA), often part of the salary package, is an allowance paid by employers to employees, to help meet rental expenses. If HRA forms part of the salary and one live in rented accommodation, they can be eligible to claim a tax exemption, depending on which city they live in.
Who can claim HRA ?
HRA exemption is available only if you:
- Are a salaried employee receiving HRA as part of your salary.
- Live in rented accommodation and pay rent.
- Opt for the old income tax regime while filing your ITR.
Notably, taxpayers choosing the new tax regime cannot claim HRA exemption.
How is HRA exemption calculated?
The exemption is restricted to the lowest of:
- Actual HRA received from the employer.
- Rent paid minus 10 per cent of salary.
- 50 per cent of salary for residents of Delhi, Mumbai, Chennai and Kolkata, or 40 per cent for all other cities (for FY 2025-26).
From FY 2026-27 onwards, Bengaluru, Hyderabad, Pune and Ahmedabad will also qualify for the higher 50 per cent limit under the Income-tax Rules, 2026.
Can you claim HRA if you pay rent to your parents?
Yes. Rent paid to parents or other relatives can qualify for HRA exemption, provided the arrangement is genuine. Experts recommend having a rent agreement, paying rent through banking channels, obtaining rent receipts and ensuring the landlord declares the rental income in their income tax return.
What documents are required?
Taxpayers should keep:
- Rent agreement.
- Rent receipts.
- Proof of rent payment.
- Landlord’s PAN if annual rent exceeds Rs 1 lakh.
These documents may be required during assessment or verification.
Claiming HRA while filing ITR
If rent details were submitted to the employer during the financial year, the exemption is generally considered while calculating TDS. If not, taxpayers can still claim HRA while filing their income tax return, subject to supporting documents.For AY 2026-27 (FY 2025-26), the ITR utility requires HRA details to be reported under Schedule EA [Section 10(13A)], where taxpayers must disclose salary, HRA received, rent paid and the applicable exemption limit.Thus, for salaried employees living in rented homes, HRA remains an important tax-saving benefit under the old regime. Maintaining proper rental documentation and accurately reporting HRA details while filing ITR can help avoid scrutiny and ensure a smooth claim.
