HRA When Rent Is Below 10% of Salary
Reviewed by CA Nikhil Gupta · Last reviewed 2 August 2026
If rent paid is equal to or below 10% of HRA salary, the rent-based limb is nil or negative.
For broader context, see the RERA and Property Compliance — Full Law and Practice Hub.
Because the exemption is the least of three limbs, the HRA exemption is effectively nil for that period.
Legal or Computational Framework
This article uses the AY 2026–27 framework for income earned in FY 2025–26 under section 10(13A) of the Income-tax Act, 1961 read with Rule 2A. For this period, and in the current official departmental material reviewed on 1 August 2026, the 50% salary limb is restricted to Mumbai, Kolkata, Delhi and Chennai; all other locations use 40%. HRA exemption is ordinarily unavailable under the default new tax regime, so regime selection is a threshold eligibility question.
Use the HRA Exemption Calculator to work through the related inputs before acting.
Worked Example
The employee received ₹1,20,000 HRA and lives in Chennai, where the city limb is ₹3,00,000. Even so, the rent limb is nil because rent is below 10% of salary. The whole ₹1,20,000 HRA remains taxable. A higher city percentage cannot override the nil rent limb.
For the connected rule, example or next step, see HRA Rent Agreement Requirements and Proof Checklist.
What Generic Pages Miss
- Treating a negative amount as a deduction from taxable HRA.
- Adding refundable deposit to rent.
- Using gross salary in the 10% test.
- Averaging rent across periods after a move.
- Assuming submission of a receipt creates eligibility.
Practical Documentation Checklist
- Rule 2A salary breakup
- Rent receipts or bank transfers
- Lease showing rent versus deposit
- Maintenance and utility breakup
- Period-wise rent changes
For the complete rules on this topic, see the core guide: HRA Exemption: Rules, Formula and Maximum Limit.
See the broader Income Tax & Salary knowledge hub for related rules and calculators on this topic.
Finin2min Summary
If rent paid is equal to or below 10% of HRA salary, the rent-based limb is nil or negative. Because the exemption is the least of three limbs, the HRA exemption is effectively nil for that period.
Frequently Asked Questions
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in