House rent allowance (HRA) is an integral part of most people’s salary. Under rule 2A of the Income Tax Rules (ITR) 1962, this salary component is not entirely taxable. People living in metros can claim 50% of their basic salary as tax-exempt HRA, while people living in non-metro cities can only claim 40% of their basic salary as tax-exempt HRA. Get answers on whether is Hyderabad a metro city for HRA calculation, is Pune a metro city for HRA calculation etc. and how is HRA in metro cities calculated in this guide.
Which metro cities are considered for HRA purpose in 2025?
There are four cities that are considered metro cities in India for HRA tax calculation purposes. These include:
- Delhi
- Mumbai
- Kolkata
- Chennai
Which are not metro cities in India for HRA calculation purposes in 2025?
Cities that are part of the National Capital Region (NCR) and Mumbai Metropolitan Region (MMR) are not considered metro cities for HRA tax calculation. Similarly, some of the largest cities in the country due to their size, population and rental value are also not considered for HRA tax calculation. They cannot claim 50% tax exemption on HRA that even though rents in these cities might be significantly high.
- Noida
- Gurgaon
- Faridabad
- Navi Mumbai
- Thane
- Bangalore
- Hyderabad
- Pune
- Ahmedabad
While India recognises Bangalore, Hyderabad and Pune as metro cities along with Delhi, Mumbai, Kolkata, and Chennai, these three cities are not recognised as metro cities when it comes to 50% tax exemption on HRA. While Bangalore has been trying to be in the list of recognised metro cities for HRA for a long time, it couldn’t make it in the list even in 2024 when the centre on August 8, 2024 announced that no new city is given the status of a metro city for HRA purposes. Industry experts believe that granting Bangalore metro city for HRA purposes ( 50% exemption) will boost the realty segment further.
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How to claim HRA in 2025?
Salaried individuals are allowed the lowest of the following amounts as tax deductions:
- The actual HRA
- 50% of your basic salary plus dearness allowance (DA), if they live in a metro city; 40% for non-metros
- Actual rent paid minus 10% of your basic salary plus DA
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What is an HRA calculator?
An HRA calculator helps in calculating the HRA that helps in claiming income tax deduction. An HRA calculator is easy to use, faster and gives accurate answer and helps in better planning of your finances when you know about the tax exemption you will get and the taxes that you will be required to pay.
Inputs to be entered in an HRA calculator
- Basic salary
- Dearness allowance
- HRA received from employer
- Rent paid by the employee
- City where the employee resides- Metro /Non-metro
On entering these details in an HRA calculator, you will get to know the HRA tax exemption amount.
Example of HRA in metro cities
Delhi-based Rajat Makhija’s basic monthly salary is Rs 50,000 and he receives Rs 18,000 as HRA. For his rented home, he pays Rs 15,000 as monthly rent. In his case, the deduction will be the least of the three amounts:
*50% of her basic salary: Rs 25,000
*Actual HRA: Rs 18,000
*Actual rent minus 10% of the basic salary: Rs 10,000 (least of the three)
This makes his annual deduction Rs 1.20 lakh
Example of HRA in non-metro cities
Avani Pathak earns Rs 20,000 as basic salary. Her HRA is Rs 7,000 and she pays Rs 6,000 for her rented quarters in Lucknow. In her case, the deduction will be the least of the three amounts:
*40% of her basic salary: Rs 8,000
*Actual HRA: Rs 7,000
*Actual rent minus 10% of the basic salary: Rs 4,000 (least of the three)
This makes the annual deduction Rs 48,000.
What are the documents required to claim HRA?
- Rent receipt
- Rental agreement
- Letter from landlord that you have rented the house
- Proof of payment of the rent for the housing unit
- Form 12BB salary slip
- PAN card of the tenant and PAN card of the landlord
Is it allowed to claim both HRA and deduction on home loan interest?
Yes, one can claim both.
- If both your own property and rental place is in the same city, then you will have to mention on why you are staying in rent.
- If your property is in another city and you stay in another city, then the claims can be done easily
Is it necessary to show your landlord’s PAN card for claiming HRA?
In case you are staying on rent and you are making a rental payment of more than Rs 1 lakh per annum, then you have to show your landlord’s PAN card for HRA claim. Failure to do so will result in losing on HRA. In case your landlord doesn’t have a PAN card, then he has to sign a self-declaration and submit.
What is the rule for tenants who pay rent to NRI landlords?
Before paying rent to the NRI landlord, a tenant has to deduct 30% TDS.
Can you claim HRA if you are paying rent to your parents?
Yes. You can claim HRA if you are paying rent to your parents provided you pay the rent, get proper invoice for it and record the whole transaction.
What can you do if you don’t get HRA from your employer?
In case you don’t get HRA from employer, you can claim your HRA deduction under Section 80GG. For that you have to
- Be salaried employee or self-employed
- You have not got HRA during that year
- The expenses related with rental apartment should be more than 10% of your total income.
- You or your family don’t have a property where you stay or carry out your work.
Who cannot claim the HRA?
People who are self-employed generally cannot claim the HRA as this facility is for salaried people. However, they can claim the HRA under Section 80GG of the IT Act, 1961.
What is HRA certificate?Â
If a government employee is unable to avail the government accommodation as per the stipulated policy, he will get a HRA certificate for claiming HRA.
Housing.com POV
HRA calculation differs between metro and non-metro cities. According to section 10 (13A), rule number 2A of IT Act, all salaried people can claim HRA. While non-salaried people cannot claim HRA, they under section 80GG can claim tax deductions on rented accommodation.
FAQs
Which cities are metro cities for HRA calculation?
Delhi, Mumbai, Kolkata and Chennai are considered metro cities for HRA calculation.
Is Pune a metro city for HRA calculation?
No. Pune is not a metro city for HRA calculation.
Is Gurgaon considered a metro city for HRA calculation?
No, Gurgaon is not considered a metro city for HRA calculation.
Is Bangalore considered a metro city for HRA calculation?
No, Bangalore is not considered a metro city for HRA calculation.
Is Hyderabad a metro city for HRA calculation?
No, Hyderabad is not considered a metro city for HRA calculation.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
