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HRA Exemption Calculator FY 2025-26

Calculate your House Rent Allowance exemption instantly. See all 3 conditions and know exactly how much HRA is tax-free.

What is HRA (House Rent Allowance)?

House Rent Allowance (HRA) is a salary component provided by employers to salaried employees to help them meet rental accommodation expenses. Under Section 10(13A) of the Income Tax Act, 1961, a portion of the HRA received can be claimed as an exemption from income tax — provided you actually pay rent for your accommodation. HRA is one of the most effective tax-saving tools available to salaried individuals under the old tax regime. The exemption amount depends on three conditions, and the lowest among them is your tax-free HRA. Understanding how this works can save you thousands of rupees in taxes every year. Note that this exemption is not available under the new tax regime — if you opt for the new regime, your entire HRA becomes taxable.

HRA Exemption Formula — 3 Conditions Explained

The HRA exemption is calculated as the minimum (lowest) of the following three amounts:

Condition 1: Actual HRA Received

The actual amount of HRA paid to you by your employer as part of your salary. This is straightforward — check your salary slip for the HRA component.

Condition 2: 50% or 40% of Basic + DA

Metro cities (Mumbai, Delhi, Chennai, Kolkata): 50% of (Basic Salary + Dearness Allowance). Non-metro cities: 40% of (Basic Salary + DA). Important: Only these 4 cities are classified as metro for HRA purposes.

Condition 3: Rent Paid − 10% of Basic + DA

Actual rent paid minus 10% of (Basic Salary + DA). If you pay high rent relative to your salary, this condition often becomes the lowest, limiting your exemption.

💡 Key Insight: The lowest of these three values is your exempt HRA. The calculator above highlights which condition applies to your situation and why.

HRA Calculation Example — Step by Step

Scenario: Rahul works in Mumbai (metro city) with a basic salary of ₹50,000/month, DA of ₹5,000/month, HRA received of ₹20,000/month, and pays rent of ₹25,000/month.

ConditionCalculationMonthlyAnnual
1. Actual HRAHRA received₹20,000₹2,40,000
2. 50% of Basic+DA50% × (₹50,000 + ₹5,000)₹27,500₹3,30,000
3. Rent − 10% Basic+DA ✓₹25,000 − 10% × ₹55,000₹19,500₹2,34,000

Result: Condition 3 is the lowest at ₹19,500/month. So Rahul's monthly exempt HRA is ₹19,500 and annual exempt HRA is ₹2,34,000. The remaining ₹6,000/year (₹2,40,000 − ₹2,34,000) is taxable HRA.

Metro vs Non-Metro — How City Type Affects Your HRA

The city where you live significantly impacts your HRA exemption. Only four cities are classified as metro for HRA purposes:

Metro Cities (50% rule)

  • • Mumbai (including Navi Mumbai, Thane)
  • • Delhi (including NCR — Gurgaon, Noida, Faridabad)
  • • Chennai
  • • Kolkata

Non-Metro Cities (40% rule)

  • • Bengaluru, Hyderabad, Pune
  • • Ahmedabad, Jaipur, Lucknow
  • • All other Indian cities and towns

A common misconception is that Bengaluru and Hyderabad are metro cities for HRA — they are not. Employees in these cities can only claim 40% of Basic + DA under Condition 2, not 50%.

Common Mistakes to Avoid in HRA Claims

  • Claiming HRA without paying rent: The entire HRA becomes taxable if you don't pay rent. Always have rent receipts.
  • Paying rent to spouse: Rent paid to your spouse is not eligible for HRA exemption. You can pay rent to parents instead.
  • Not getting landlord's PAN: If annual rent exceeds ₹1,00,000, landlord's PAN is mandatory. Without it, the employer may not process the exemption.
  • Inflating rent amounts: The Income Tax department cross-verifies rent claims. Inflated claims can lead to penalties and interest under Sections 270A and 234B.
  • Claiming HRA under new regime: HRA exemption is not available under the new tax regime. Ensure you opt for the old regime to claim it.
  • Assuming Bengaluru is a metro city: Only Mumbai, Delhi, Chennai, and Kolkata qualify for the 50% rule. All others get 40%.

HRA vs Home Loan — Can You Claim Both?

Yes, you can claim both HRA exemption and home loan interest deduction simultaneously in certain situations. If you own a house in one city (say your hometown) and pay rent in another city (your work city), you can claim HRA exemption for the rent you pay and also claim home loan interest deduction under Section 24(b) up to ₹2,00,000 for the house you own. This is a legitimate tax planning strategy used by many salaried professionals. However, if you own and live in the same house, you cannot claim HRA. For a complete comparison of your tax liability including home loan interest, use our Income Tax Calculator.

Frequently Asked Questions

House Rent Allowance (HRA) is a component of salary paid by employers to employees to meet their rental expenses. Any salaried employee who receives HRA as part of their salary and pays rent for their accommodation can claim HRA exemption under Section 10(13A) of the Income Tax Act. Important: You must actually be paying rent to claim this exemption — if you live in your own house, you cannot claim HRA. Also, HRA exemption is available only under the old tax regime, not the new regime.
HRA exemption is calculated as the minimum (lowest) of three conditions: 1) Actual HRA received from your employer, 2) 50% of (Basic Salary + DA) for metro cities (Mumbai, Delhi, Chennai, Kolkata) or 40% for non-metro cities, 3) Actual rent paid minus 10% of (Basic Salary + DA). The lowest of these three amounts is your tax-exempt HRA. The remaining HRA (total HRA minus exempt HRA) is taxable.
For HRA exemption purposes, only four cities are classified as metro cities: Mumbai, Delhi, Chennai, and Kolkata. In metro cities, you can claim 50% of (Basic + DA) as HRA exemption under Condition 2. All other cities — including Bengaluru, Hyderabad, Pune, Ahmedabad, Jaipur — are classified as non-metro, where the limit is 40% of (Basic + DA). Note that Bengaluru is often mistakenly assumed to be a metro city for HRA purposes, but it is not.
No, you cannot claim HRA exemption if you are living in your own house or a house owned by your spouse. HRA exemption requires you to actually pay rent for your accommodation. However, if you own a house in one city and pay rent in another city (e.g., own a house in your hometown but rent in your work city), you can claim both HRA exemption and home loan interest deduction under Section 24(b).
Yes, you can claim HRA exemption by paying rent to your parents, provided the arrangement is genuine. Your parents must declare this rental income in their tax returns. You need proper rent receipts and ideally a rental agreement. The payment should be made through bank transfer for documentary evidence. However, you cannot pay rent to your spouse and claim HRA exemption.
No, HRA exemption under Section 10(13A) is NOT available under the new tax regime. The new regime offers lower slab rates but removes most deductions and exemptions including HRA. If your HRA exemption and other old regime deductions are significant, the old regime may save you more tax. Use our Income Tax Calculator to compare both regimes side-by-side and decide which is better for you.
To claim HRA exemption, you need: 1) Rent receipts signed by your landlord (required if rent exceeds ₹3,000/month). 2) Rental agreement (lease deed). 3) PAN of the landlord (mandatory if annual rent exceeds ₹1,00,000). 4) Bank transaction proof if paying digitally. Your employer will ask for these documents during the tax declaration process. Keep them for at least 6 years in case of an IT department inquiry.
If you receive HRA as part of your salary but do not pay any rent (for example, you live in your own house or with family without paying rent), the entire HRA amount is fully taxable. It will be added to your taxable income. In Condition 3 of the HRA formula, rent paid minus 10% of Basic+DA becomes negative (or zero), so the exempt HRA becomes zero, and the full HRA becomes taxable.

Last updated: March 2026. HRA exemption rules are under Section 10(13A) of the Income Tax Act. This calculator is for estimation purposes only, valid under the old tax regime. Visit incometax.gov.in for official information.

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