What Is Section 10(13A) of the Income Tax Act and How Does HRA Exemption Work?

Here is a simple example to understand the calculation.

Suppose your monthly figures are:

• Basic salary: ₹50,000
• HRA received: ₹20,000
• Rent paid: ₹18,000
• Location: A non-metro city

The calculation would be:

• Actual HRA received: ₹20,000
• Rent paid minus 10% of basic salary: ₹18,000 − ₹5,000 = ₹13,000
• 40% of basic salary: ₹20,000

The lowest amount is ₹13,000, so the monthly HRA exemption would be ₹13,000, assuming these figures represent the relevant period and there are no other adjustments.

The remaining ₹7,000 of monthly HRA would be taxable. The actual annual calculation should use the relevant salary, rent, and HRA figures for the period in which you occupied the rented accommodation.

One important point is that the tax regime matters.

Under the old tax regime, eligible salaried employees can generally claim HRA exemption if they meet the conditions and maintain the required supporting evidence.

Under the new tax regime, the Section 10(13A) HRA exemption is not available. Therefore, compare the tax payable under the applicable regimes before deciding which one is more beneficial for your circumstances.

If you live in a house you own and do not pay rent, you generally cannot claim HRA exemption. If you rent a property from your parents, the arrangement must be genuine, with actual rent payments and appropriate records. Simply creating a rent agreement without genuine rental payments is not enough.

Keep your rent receipts, rental agreement where applicable, and payment records. Your employer may also request the landlord's PAN when the applicable reporting threshold is crossed.

Section 10(13A), read with Rule 2A of the Income-tax Rules, 1962, provides an exemption for eligible House Rent Allowance received by a salaried employee who actually pays rent for residential accommodation.

The exemption is generally the lowest of these three amounts:

• Actual HRA received from the employer.
• Rent paid minus 10% of the relevant salary.
• 50% of salary for accommodation in Mumbai, Delhi, Kolkata, or Chennai, or 40% for other locations.

For this calculation, salary generally means basic salary, eligible dearness allowance, and qualifying turnover-based commission.

This means that receiving HRA does not automatically make the entire allowance tax-free. Your rent and salary figures determine the exemption.

One thing I learned was that Section 10(13A) generally applies only if your salary includes an HRA component. A friend of mine received a consolidated salary without HRA, so he couldn't claim this exemption and instead checked whether another provision for rent paid applied.

Also, recent ITR utilities ask for more HRA-related information when claiming the exemption, so it's useful to keep your rent receipts, landlord details, and salary records ready before filing. 

I switched jobs midway through the financial year, so I had to check both employers' Form 16s carefully. One employer had considered my HRA correctly, while the other hadn't because I submitted my rent proofs after the payroll deadline.

When I filed my return, I recalculated the exemption using my salary and rent details for each employment period. It took a little extra work, but the final figures matched the rules.

If you changed cities or rented different houses during the year, just make sure your rent records cover each period separately.