In this guide
AY 2026-27 covers salary earned from 1 April 2025 to 31 March 2026. HRA exemption for this period is governed by Section 10(13A) of the Income-tax Act, 1961, read with Rule 2A of the Income-tax Rules, 1962.
For AY 2026-27, the 50% salary limit applies if the rented home is in Delhi, Mumbai, Kolkata or Chennai. In other locations, the limit is 40%. The expanded city list under the Income-tax Rules, 2026 applies from 1 April 2026, so it does not apply to income reported for AY 2026-27.
HRA exemption is available under the old tax regime, but not the new tax regime.
How to calculate HRA exemption
The exempt amount is the lowest of these three figures:
| Calculation | Amount |
|---|---|
| Actual HRA received | HRA included in salary for the relevant period |
| Rent paid minus 10% of salary | Rent actually paid less 10% of salary for that period |
| City-based limit | 50% of salary for Delhi, Mumbai, Kolkata or Chennai; otherwise 40% |
For this calculation, “salary” generally means basic salary, dearness allowance if it forms part of retirement benefits, and commission based on a fixed percentage of turnover, if applicable. Calculate it for the period you occupied the rented home. Any HRA above the exempt amount is taxable.
Example: During FY 2025-26, an employee receives ₹2,40,000 in HRA, has salary of ₹6,00,000 for HRA purposes and pays ₹3,00,000 in rent. The home is outside the four cities listed above.
- Actual HRA: ₹2,40,000
- Rent minus 10% of salary: ₹3,00,000 − ₹60,000 = ₹2,40,000
- 40% of salary: ₹2,40,000
The HRA exemption is ₹2,40,000, the lowest of the three amounts. It would be lower if the rent paid or HRA received were lower. You can check your figures with TaxClear’s HRA exemption calculator.
Can you claim HRA if you rent from your parents?
Rent paid to a parent is not automatically disallowed. You must actually occupy a home you do not own and pay rent for it. The arrangement should be genuine and supported by records.
Keep a rental agreement, rent receipts, payment evidence and the landlord’s details. Your parent may need to report the rent as income, depending on their tax position. A paper arrangement or circular transfer of money without genuine rent may not support an exemption claim.
If your annual rent exceeds ₹1 lakh, provide the landlord’s PAN to your employer for HRA reporting. If the landlord does not have a PAN, check with your employer about the required declaration and supporting documents.
You cannot claim HRA exemption for a home you own or for a period when you did not pay rent. If you own one home but genuinely rent another, consider the facts and keep records for both.
Records and ITR reporting
Keep these documents for FY 2025-26:
- Rental agreement and receipts showing the rental period and amount;
- Bank statements or other proof of rent payments;
- Landlord’s name, address and PAN, where required;
- Salary slips and Form 16 showing HRA and the exemption considered by your employer.
If your employer did not account for an eligible HRA exemption, check your salary details and supporting documents before reporting it in your AY 2026-27 return. TaxClear’s salaried employee ITR guide and online ITR filing guide explain the return process.
Frequently asked questions
Can I claim HRA if I live with my parents without paying rent?
No. HRA exemption requires you to actually pay rent for the residence.
Can I claim HRA under the new tax regime?
No. HRA exemption under Section 10(13A) is not available under the new regime.
Do I attach rent receipts to my ITR?
Rent receipts are not routinely attached to the ITR. Keep them as supporting evidence in case your employer or the tax department asks for them.
Can I claim HRA if my employer did not give me the exemption?
You may claim an eligible exemption in your ITR if you meet the conditions and have supporting evidence. Check that your claim matches your salary details and chosen tax regime.
Is rent paid to a parent automatically eligible?
No. The arrangement must involve genuine rent paid for a home you occupy and do not own.
