HRA, and the exemption that turns on evidence
An allowance for rented accommodation, exempt under a three-way least-of test — where the arithmetic is rarely the problem and the receipts usually are.
What it is
An allowance for rented accommodation, taxable unless exemption is claimed.
The test
Least of: actual HRA, rent paid minus 10% of basic, and 50% of basic in metros or 40% elsewhere.
The trap
Accepting a declaration as a proof. Rent receipts, and the landlord's PAN above the threshold, are what an assessment asks for.
HRA is an allowance for rented accommodation. It is taxable unless the employee claims exemption, which is the least of: actual HRA received, rent paid minus 10% of basic, and 50% of basic in metro cities or 40% elsewhere.
How it works in practice
On ₹20,000 basic with ₹8,000 HRA and ₹10,000 rent in Pune, the exemption is the least of ₹96,000, ₹96,000 and ₹96,000 annually — so the whole HRA may be exempt.
What to watch for
Rent receipts and the landlord’s PAN above ₹1 lakh annual rent are the usual audit gap, not the arithmetic.
How Klok handles it
Klok holds HRA declarations and proofs against the employee, so verified and merely declared are never the same thing.
HRA (House Rent Allowance) FAQs
Can HRA be claimed if the employee lives with parents?
Yes, where rent is genuinely paid to them and can be evidenced — an agreement, actual payment, and the parents declaring the rental income. An arrangement that exists only on a receipt pad will not hold.
Is HRA exemption available in the new tax regime?
No. That is one of the main exemptions given up in exchange for the lower slab rates, and it changes which regime suits an employee paying substantial rent.
When is the landlord's PAN required?
Above the prescribed annual rent threshold, currently ₹1 lakh. Missing PAN above that threshold is the most common reason an otherwise valid claim is disallowed.
Can an employee claim HRA exemption without paying rent?
No. The exemption is against rent actually paid, and a claim with no outflow is what surfaces on assessment. Living in an owned house rules it out.
Does the city matter?
Metro and non-metro treatment differ, and a mid-year move means computing each period separately rather than applying one treatment to the whole year.
What if the employee shares rent with a flatmate?
The claim should reflect what that employee actually pays, supported by their share of the arrangement. Two people claiming the full rent on the same tenancy is a pattern that gets noticed.
Stop calculating this by hand
Klok computes it from your own attendance and salary data, every month, with the working shown.