HRA is a common allowance with a tax benefit under section 10(13A): the exempt portion is the least of (a) actual HRA received, (b) rent paid minus 10% of basic, and (c) 50% of basic (metro) or 40% (non-metro). Non-metro caps the benefit lower. Note the acronym clash: in HR conversations HRA can also mean Health Risk Assessment - context decides.
In India
Only claimable under the old tax regime; the new regime forgoes most such exemptions for lower slab rates. Employees increasingly need help choosing the regime that suits them.
In practice
Basic ₹50,000/mo, HRA ₹25,000/mo, rent paid ₹22,000/mo in a metro. Exemption = least of ₹25,000, (₹22,000 − ₹5,000 = ₹17,000), and ₹25,000 = ₹17,000/mo exempt; the remaining ₹8,000 is taxable.