What is HRA in your salary slip?
HRA is one of the most common lines on an Indian salary slip — and one of the few that can legally cut your tax bill if you pay rent. Here's what it means and how the exemption works.
What HRA means
HRA (House Rent Allowance) is a part of your salary meant to help cover the cost of renting a home. It appears as its own line in the earnings section of your payslip. If you actually pay rent, a portion of your HRA can be exempt from income tax — which is what makes it worth understanding.
When HRA is tax-free
Under Section 10(13A), the tax-exempt part of your HRA is the lowest of these three amounts:
- the actual HRA you receive;
- 50% of your basic salary if you live in a metro (40% if non-metro);
- the rent you pay minus 10% of your basic salary.
Whatever is left over after the exempt portion is added back to your taxable salary. If you don't pay rent, none of your HRA is exempt.
Metro vs non-metro
For HRA, only Delhi, Mumbai, Kolkata and Chennai count as metro cities, where the limit is 50% of basic. Everywhere else — including Bengaluru, Hyderabad and Pune — the limit is 40% of basic.
One important catch
HRA exemption applies only in the old tax regime. The new regime offers a higher standard deduction instead but no HRA exemption, so if you pay substantial rent it's worth comparing both regimes before deciding.
Work out your exemption
Enter your basic, HRA and rent into the HRA exemption calculator to see your exact exempt and taxable amounts, then compare the old and new regimes to see which leaves you better off.
Frequently asked questions
Is HRA fully tax-free?
No. Only part of your HRA is usually exempt. The exempt amount is the lowest of three figures: the actual HRA you receive, 50% of basic for metro cities (40% for non-metro), and rent paid minus 10% of basic. Anything above that is taxable.
Can I claim HRA exemption in the new tax regime?
No. HRA exemption under Section 10(13A) is available only in the old tax regime. If you pay significant rent, that can be a reason the old regime works out cheaper for you.
Which cities count as metro for HRA?
Only Delhi, Mumbai, Kolkata and Chennai are treated as metro (50% of basic). Every other city, including Bengaluru, Hyderabad and Pune, is non-metro (40% of basic) for HRA purposes.
Do I need rent receipts to claim HRA?
Yes. Employers ask for rent receipts, and if your annual rent exceeds ₹1,00,000 you must also report the landlord's PAN. Keep receipts and your rent agreement as proof.
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