HRA (House Rent Allowance)
A salary component paid to cover rental accommodation costs, partly or fully exempt from tax under Section 10(13A) if you pay rent and choose the old tax regime.
HRA is a component of salary specifically meant to help cover rent, and a portion of it can be exempt from tax under Section 10(13A), calculated as the lowest of three amounts: actual HRA received, rent paid minus 10% of basic salary plus DA, and 50% (metro) or 40% (non-metro) of basic salary plus DA. Whatever HRA isn't covered by this exemption is taxed as normal salary income.
The exemption is only available under the old tax regime, and only if you're actually paying rent; receiving HRA but not paying rent, for example while living in your own house, makes the exemption effectively zero. Employers typically require rent receipts, and the landlord's PAN if annual rent exceeds ₹1 lakh, before applying this exemption to salary TDS.
This glossary entry is for general informational purposes only and does not constitute professional tax, legal, or financial advice. Rules and rates change, so consult a qualified Chartered Accountant for advice specific to your situation.