Can you claim HRA for rent paid in a different city in 2025?

Under the Income Tax Act, 1961, an employee can claim HRA tax exemption benefits on fulfilling certain conditions such as rental agreement between landlord and the employee, duration of the rent, address, mode of payment, rental receipts and PAN card (in case the rent exceeds Rs 8,000 monthly).

With work-from-home becoming key part of many companies in India, several salaried employees have the chance to shift to their native places and work from there. A significant number of such employees receive HRA as part of their salary.  Will such an employee be able to claim HRA for the rent paid at their native place, away from their place of employment?

What is HRA?

HRA stands for House Rent Allowance. This is a part of your salary that is paid to you for paying the monthly house rent. What is best about HRA is that you may not need to pay tax on it.

HRA exemption in old tax regime vs new tax regime

Note that to claim HRA you will have to opt for old tax regime as this is not included in the new tax regime. Also, if you forget to opt, then by default, you would have chosen the new tax regime, thereby losing the chance to claim HRA benefits.

What are the conditions for claiming HRA in 2025?

Let us first understand the legal provisions for allowance of HRA to employees.

• Section 10(13A) of the Income Tax Act provides that a salaried person can claim tax benefits with respect to HRA received from his employer, on fulfilment of certain conditions.
• Section 10 (13A) does not contain any condition as to the place for which the employee can claim the HRA exemption, as long as the residential accommodation is occupied by the employee and the other conditions are satisfied. So this translates that a person can also claim HRA for rent paid in a different city.
• The law further provides that the benefit of HRA can only be claimed, if the rent has actually been paid by the employee and the residential accommodation, for which the rent is paid, is not owned by the employee.

See also: Can you claim both, HRA as well as home loan benefits?

HRA calculation: Classification of Indian cities

According to the Seventh Central Pay Commission, cities in India are categorised into three classes- X, Y and Z based on which their HRA percentage depends. Under this classification, the X class consists of cities such as Delhi, Mumbai, Kolkata and Chennai. These cities get the highest HRA of 30% of the basic pay. Class Y has cities such as Ahmedabad, Pune and Hyderabad and they receive HRA of 20% of basic pay. All other Indian cities fall under the Z class and these receive HRA at 10% of the basic pay.

Should you pay rent to same landlord to claim HRA?

The law does not have any restriction that the rent should be paid to the same landlord throughout the year. The employee may change his residential accommodation as many times as he needs to and claim HRA benefit for rent paid to different landlords during the year, provided the claim for HRA has not been made for the same period more than once.

This can be better explained and understood with the help of an analogous situation. In this world of internet and enabling technology, it is always possible that the employee and the employer may be geographically situated at different places within the country or even in different countries. Suppose a software engineer is hired by a US-based company with HRA being a component of his salary. So, even during normal times and in spite of the employer and employee being situated in two different countries, the Indian law will still allow the Indian employee to claim the HRA benefit, as long as he complies with the basic conditions of having paid the rent for the residential accommodation occupied by him and not owned by him.

From the above discussion of the legal provisions, it becomes clear that the contention of the HR department of such companies is absolutely wrong and is not in conformity with the legal provisions.

Also read how to claims tax deduction under 80GG is HRA is not part of your salary.

HRA calculation in 2025

Rule 2A of Income Tax Rules 1962 prescribes the limits up to which you can claim HRA benefits. So the limit is the least of the following amounts:

i) Amount of HRA actually received.

ii) Amount of rent paid over 10% of your salary.

iii) 50% of your salary in case the accommodation is in the four metro cities, or else, 40% of your salary.

For the purpose of HRA claim, salary will include the basic salary and the dearness allowance only. The computation of exempt allowance has to be made for the period for which the accommodation is occupied and the HRA benefit cannot be made on an overall basis for the whole year. So, effectively, the calculation has to be done on a monthly basis, to arrive at the exemption portion of HRA for the respective months. From the above rules it becomes clear that you are not entitled to claim HRA exemption, if the rent paid does not exceed 10% of the salary. Moreover, you will not be entitled to claim the HRA benefit for the period for which you have not paid any rent.

See also: All about HRA calculation & HRA exemption  

Documents required for claiming HRA in 2025

Employers insist on submission of a duly stamped and executed rent agreement, in addition to the rent receipts, for allowing HRA claims.

• It may be noted that the law does not require that there should be a valid leave and licence agreement in place, for claiming the HRA benefits.
• The law casts a duty on the employer to obtain sufficient proof, before he grants you the benefit of HRA. So, even if you produce copies of the rent receipts, supported by a bank statement evidencing payment of rent, it should be treated as sufficient compliance by the employer.
• Submitting an agreement only makes your transaction look more genuine.
• The law does not require you to pay the rent through a banking channel. The rent can even be paid by cash, as long as the transaction is genuine and the recipient has included the rental income in his income tax returns.
• Nevertheless, it is advisable to pay the rent through banking channels, to avoid any complication. The law also does not require you to pay rent on a monthly basis but it is advisable to do so, to avoid creating suspicion in the minds of the tax authorities.

Can I claim HRA by paying rent to parents?

Yes, it is legal to claim HRA benefit if you have paid rent to your parents. Note that there should be a legal rental agreement in place and proper receipts should be given by your parents for the rent that is paid.

Please note that you will not be able to claim the HRA benefit, in case you are joint owners of the property with your parents. So if you have a residential house that you own jointly, with your parents, siblings or spouse and are staying on rent in it, you are not entitled to claim HRA exemption benefits.

Likewise, you will not be able to claim HRA, in case you have entered into an agreement for tax planning, to lease out your own property to your employer, who, in turn, gives you rent.

Can an employee claim HRA benefit for rent paid to a spouse?

One can claim HRA benefit for the rent paid to the spouse in line with the verdict pronounced by the Income Tax Appellate Tribunal (ITAT). Note that such a tax benefit can be availed only under old tax regime and not under the new tax regime. Also note that you should not be co-owner with your spouse for the flat for which rent is paid and HRA is being planned to be claimed.

Can you claim HRA for rent in a different city and home loan tax benefits in a different city?

One can claim both HRA and home loan interest tax benefits if they are eligible for each of them. The house for which the home loan has been taken should not be the same house for which you are paying rent.

Eligibility criteria

• If house for which home loan is taken is under construction, then HRA for the rented property can be availed.
• If you live in a different city for work and your own house is in different city, you can claim HRA for the rented property and home loan tax benefits for the owned property.

What happens if landlord in different city where HRA is availed doesn’t share PAN?

Any HRA exemption for rent below Rs 1 lakh per annum can be availed without the landlord’s PAN card. However, while availing it, it is recommended that you give a declaration that the landlord didn’t share PAN card details.  In case the tenant pays Rs 20,000 per month as rent and he doesn’t have access to landlord’s PAN card, he can only avail tax exemption on 50% of the rent paid – Rs 10,000.

What to do if the company deducts tax even after submitting rent receipts?

There may be a situation where the HR department either does not fully understand the legal requirements for claiming the HRA benefits, or is adamant and being extra careful and disallows your claim of HRA and deducts tax on the full amount of HRA paid. Even in such a situation, all is not lost. You can still make a claim for the exemption of HRA, while filing your income tax return and claim a refund for the excess tax deducted by your employer. In such a situation, preserve all the documentary evidence pertaining to payment of the rent, such as the rent receipt, bank statement and any other documentary evidence in support of you having stayed in a particular place on rent, like courier or post received on the rental address.

Housing.com POV

House rent allowance is a component in one’s salary that covers a major part of the income one earns. This is the reason why most people avail the benefits attached with HRA exemption.  There are many instances where HRA can be claimed including rent paid to husband or wife. However, some are subjected only to old tax regime. So, it is recommended to check the tax angle for each instance thoroughly before proceeding.

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