Under section 10 (13A) of the Income Tax Act, you can claim a deduction on the rent you pay

Aam aurat and aam aadmi just moved into the city of dreams. Aam aurat managed to get a good job with a big multinational company. Aam aadmi, never the one to discourage his wife, moved with her, hoping to find a better job in the city of dreams.
They managed to rent a one-room-kitchen house at Rs 15,000 per month from Boodhi Tai, affectionately called BT, who lived in the same building.
Aam aurat had just returned from her first day in the new office and told her husband over a cup of tea he made for her, "You know, one of my colleagues in office today told me I could take a tax deduction on the rent I pay."
"Ah, really?" replied aam aadmi.
"Yes. But he didn't explain everything. There are so many people who live in this building. Can you just ask around and find out?"
"Sure, I'll do that."
With that, aam aadmi stepped into the common passage and went looking for BT. "Can you tell me about the tax deductions allowed for rent?" he asked her as soon as he found her. "Beta. I don't understand any of these things. Why don't you ask Sri Sri Sri Baba Taxdev. He lives next to you. Baba handles all these things for me," she replied.
Aam aadmi went and knocked on Baba's door. "Hi. I am aam aadmi. Just moved into the next room. BT told me you could help me with some details I need," he said when Baba opened the door.
Baba twirled his long beard and replied, "Tell me. How can I help you?"
Aam aadmi parroted what his wife told him.
"The first thing I need to know is how much rent you are paying," Baba asked.
"Rs 15,000 per month."
The reply sent Baba into peals of laughter. "You know how much I pay? Rs 100. Rent Control Act, you see. Been staying here for ages. So somebody's got to bear the cost," he guffawed.
Immediately, aam aadmi regretted his parents' decision to buy a house in the capital and not in the city of dreams.
"Anyway, how much house rent allowance (HRA) do you get?" Baba asked.
"I am the house husband right now. Looking for a job. My wife is working. She gets Rs 16,000 per month as HRA. Her basic plus dearness allowance comes to around Rs 40,000 per month. I guess you would need to know that as well," aam aadmi said.
"So you want to know how much deduction your wife can get."
"Yes."
"The deduction is allowed under section 10 (13A) of the Income Tax Act. I like to discuss sections when talking about the Income Tax Act. The deduction is restricted to a minimum of:
a) The actual HRA that she gets
b) The actual rent paid less 10% of her salary, where salary includes the basic salary plus the dearness allowance
c) 50% of her salary if the rented house is in Mumbai, Chennai, Kolkata and Delhi and 40% of the salary in any other case," Baba explained. "The HRA that an individual receives over and above this is included in taxable income," he continued.
Looking confused, aam aadmi whined, "That went over my head...."
With his calm intact, Baba replied, "Ok, let me explain. Your wife gets an HRA of Rs 16,000 per month and pays a rent of Rs 15,000 per month. Her basic plus dearness allowance is Rs 40,000 per month. So the actual rent paid, less 10% of the salary, would equal Rs 11,000 per month (Rs 15,000 - 10% of Rs 40,000). Since she lives in the city of dreams, a k a Mumbai, for calculating her deduction, we would be considering 50% of her salary. This comes to Rs 20,000 (50% of Rs 40,000)."
In the same vein, he continued, "As we can see from the calculation, the minimum amount from the three specified conditions is Rs 11,000. And so, she would be allowed a total deduction of Rs 1.32 lakh (Rs 11,000 x 12) from her taxable income per year. For the remaining amount of HRA-Rs 4,000 per month or Rs 48,000 for the year-tax will have to be paid."
At that point, Baba's cell phone started ringing. "Arre Netaji. How much black to white will you do? Thoda to apni janta par reham karo," he loudly laughed into the phone. After a few minutes of conversation, he hung up.
"Sorry, that was Netaji calling. To claim this deduction, she would have to submit a rent receipt issued by the landlady or a copy of the house lease agreement to the company she works for. A proof of rent paid is required only if the rent being paid is higher than Rs 3,000 per month," Baba explained.
The explanation wasn't to aam aadmi's liking. "That's funny. Why can't we claim the entire rent paid as deduction?" he asked.
"Well, the Income Tax Act is funny sometimes. Come to one of my pravachan whenever you get some time. I will give you more examples of how funny the Income Tax Act can be," Baba said.
He ran a hand over his beard and then smiled cattily, "Don't forgot to bring some dakshina. You can get a deduction on donations made for an approved charitable cause under section 80G of the Income Tax Act." Aam aadmi smiled despite his disappointment with the HRA deduction allowed and thanked the Baba, then walked out the door.