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House Rent Allowance HRA - Meaning & Definition

Published by MBA Skool Team in Human Resources Terms Last Updated: September 22, 2023Read time:

What is House Rent Allowance HRA?

An employer includes certain allowance in the remuneration of the employee termed as House Rent Allowance or HRA. This allowance is used by the employee to meet the rental expenses for his/ her accommodation.

The  reason why HRA has gained so much importance in the recent years is because according to the Income Tax Act, Section 10 (13A) and Rule 2A of the Income tax rules, the employee is exempted from paying tax on HRA.

There are several procedures in place to check if the employee is actually staying on a rented apartment not owned by him.  The exemption of HRA will be the minimum of the below 3 options:

  1. Actual house rent allowance received from the employer
  2. Actual house rent paid – 10% of the basic salary
  3. IF one lives in a metro, then 50% of basic salary

Else 40% of the basic salary


For e.g. if ones basic salary is INR 200000, HRA received= 50000, rent paid = INR 60000

Then HRA exemption is minimum of (50000, 40000, and 100000)

Hence the exemption that one can obtain is INR 40000

This article has been researched & authored by the Business Concepts Team which comprises of MBA students, management professionals, and industry experts. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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