5 things you must know about the most common allowance – HRA

Updated on: Jan 22nd, 2024

4 min read

#1: The HRA allowance you receive from your employer is not fully tax-deductible. It may be fully or partially exempt from tax.

The least of the following three is taken to be exempt from tax. The remainder of your HRA allowance is added back to your taxable salary.

HRA received from your employer
Actual rent paid minus 10% of Salary
50% basic salary for those living in metro cities (40% for non-metro cities)

Try out our free HRA calculator here.

#2: You can claim HRA by showing that you are paying rent to your parents

If you don’t live in a rented accommodation, but live with your parents, and are given HRA, you can still make use of this allowance. For this though, your parents must be owners of the property you live in and must show this in their income tax return as rental income. Read more

#3: HRA can be claimed directly on your income tax return

Forgot to submit the rent receipts to your employer at the time of proof submission? Well, you can still claim HRA while filing your income tax return. Adjust your taxable income to include HRA and recalculate tax on the lowered taxable income. If tax has been deducted in excess, you can claim a refund on the money.

#4: Landlord’s PAN is compulsory to submit if it exceeds Rs.8,333 per month

A new notification from the Income Tax Department requires all tenants who pay rent in excess of Rs.1,00,000 per year to mention landlords’ PAN compulsorily in the income tax return. This is to deter landlords’ from hiding rental income in their income tax return. Read more.

5: HRA is independent of home loan deduction

Homeowners paying back on their home loan and getting HRA as part of their salary can avail both the house property-related tax benefits to lower their taxable income. Want to know about other allowances that are part of your payslip. Read more on our Salary guide here.

Note: If you are living on rent and do not receive HRA as a part of your salary, then you can claim a similar deduction under section 80GG. Find out complete details here.

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Quick Summary

HRA allowance may be partially tax-exempt based on specific criteria. It can be claimed even if you stay with your parents and can be included while filing taxes. Landlord's PAN is needed for rent exceeding Rs. 8,333/month. HRA is separate from home loan deduction. You can claim similar deduction under section 80GG without HRA. File your returns quickly with pre-filled data.