HRA (House Rent Allowance) is a tax-exempt component of salary for employees who pay rent. The exemption is the least of: (1) actual HRA received, (2) 50% of salary (metro) or 40% (non-metro), or (3) rent paid minus 10% of salary.

Key Points

• Eligibility: Salaried employees living in rented accommodation
• Metro cities: Mumbai, Delhi, Kolkata, Chennai—50% of salary
• Others: 40% of salary
• Proof: Rent receipts and sometimes rent agreement

For FIRE Planning

HRA significantly reduces taxable income for renters. If you’re renting, ensure you claim HRA and submit rent receipts. For FIRE investors, lower taxes mean more to invest—HRA, LTA, and 80C together can substantially increase your investible surplus.