HRA Calculator — Calculate HRA Exemption for Tax
| # | Condition | Amount (₹) | Least? |
|---|---|---|---|
| 1 | Actual HRA Received | 20,000 | |
| 2 | Rent Paid - 10% of Basic | 13,000 | ✓ Least |
| 3 | 50% of Basic Salary | 25,000 |
HRA exemption is only available under the old tax regime. HRA is not deductible under the new regime. Consult your employer's payroll department or a tax advisor for your specific situation.
What is HRA (House Rent Allowance)?
House Rent Allowance (HRA) is a component of the salary package that employers provide to help employees cover their rental accommodation costs. While HRA is received as part of the salary (and therefore appears taxable), Section 10(13A) of the Income Tax Act allows a portion of it to be exempt from tax — provided the employee actually lives in rented accommodation.
The HRA exemption reduces your taxable income, resulting in lower income tax. It is one of the most significant tax-saving opportunities available to salaried employees in India and is part of the old tax regime only. If you have opted for the new tax regime, your entire HRA is taxable as income.
HRA Exemption Formula — Three Conditions
The HRA exemption under Section 10(13A) is the minimum of these three amounts:
HRA Exemption = Minimum of:
- Actual HRA received from employer
- Rent paid − 10% of Basic Salary
- 50% of Basic Salary (metro) or 40% of Basic Salary (non-metro)
"Basic salary" for this purpose includes basic pay plus Dearness Allowance (DA) if DA forms part of retirement benefit salary. It does not include other allowances like conveyance, transport, etc.
Worked Example — Step by Step
Monthly figures: Basic ₹50,000 | HRA received ₹20,000 | Rent paid ₹18,000 | City: Mumbai (metro)
Metro vs Non-Metro Cities for HRA
The Income Tax Act specifically designates only four cities as "metro" for HRA purposes. All other cities — including large tech hubs like Bengaluru — are classified as non-metro.
| Category | Cities | HRA % of Basic |
|---|---|---|
| Metro | Delhi, Mumbai (incl. Thane & Navi Mumbai), Chennai, Kolkata | 50% |
| Non-Metro | Bengaluru, Hyderabad, Pune, Ahmedabad, Jaipur, Chandigarh, all other cities | 40% |
How to Maximise HRA Tax Saving
Given that HRA exemption is the minimum of three conditions, the binding constraint limits your benefit. Here is how to identify and work within each:
- If condition 1 is the lowest (HRA received is lowest): You cannot get more exemption than what your employer pays as HRA. Negotiate a higher HRA component in your CTC structure if possible.
- If condition 2 is the lowest (rent - 10% basic): Increase your rent payment. For example, if you pay rent to parents (and they declare it as rental income in their ITR), you can increase the rent amount to boost this condition — but this must be genuine.
- If condition 3 is the lowest (% of basic): This is fixed by your location. Metro employees have a natural advantage. Non-metro employees should ensure conditions 1 and 2 do not exceed condition 3 (the actual binding limit).
- Paying rent to parents: You can pay rent to your parents (who own the house) and claim HRA exemption, while parents can benefit from a ₹30% standard deduction on rental income under Section 24(a) and their likely lower tax bracket. This is a legitimate tax planning strategy, but the rental arrangement must be genuine with proper documentation.
Frequently Asked Questions
What is HRA exemption and how is it calculated?
HRA (House Rent Allowance) exemption under Section 10(13A) allows salaried employees to reduce their taxable income if they live in a rented house. The exemption is the minimum of three amounts: (1) Actual HRA received from employer, (2) Rent paid minus 10% of basic salary, and (3) 50% of basic salary for metro cities (Delhi, Mumbai, Chennai, Kolkata) or 40% for non-metro cities. The lowest of the three conditions is the allowable exemption.
Can I claim HRA if I live in my own house?
No. HRA exemption is only available if you actually pay rent for the accommodation you live in. If you own the house you live in, the full HRA received from your employer is taxable as income. However, if you own a house in one city and work in another city where you pay rent, you can claim both HRA exemption (for the rented accommodation) and home loan interest deduction under Section 24(b) simultaneously.
Do I need rent receipts to claim HRA?
Yes, rent receipts are the primary documentation required. If your annual rent exceeds ₹1,00,000 (₹8,333/month), you must also provide the landlord's PAN. If the landlord is a close relative (spouse, parents in the same house), HRA claims may be disallowed by the tax department if the rental arrangement appears non-genuine. Keep all rent receipts, the rental agreement, and proof of payment (bank transfers are preferable over cash).
Is HRA available under the new tax regime?
No. HRA exemption is not available under the new tax regime (introduced in FY 2020-21). Under the new regime, all allowances including HRA are fully taxable, and the only deduction available is the ₹75,000 standard deduction. If you pay significant rent, you must compare whether the HRA exemption under the old regime outweighs the lower tax rates of the new regime for your income level.
Which cities are classified as metro for HRA purposes?
Only four cities are classified as "metro" for the purpose of HRA exemption under Section 10(13A): Delhi, Mumbai (including Navi Mumbai and Thane), Chennai, and Kolkata. For these cities, 50% of basic salary is used as the third condition. For all other cities — including Bengaluru, Hyderabad, Pune, Ahmedabad, and all other Tier 2 cities — the applicable rate is 40% of basic salary. This is a common point of confusion as many people assume Bengaluru or Hyderabad qualify as metro.
Related Calculators
- Old vs New Tax Regime Calculator — Check if HRA saving makes old regime worth it
- Income Tax Calculator India — Full income tax calculation for FY 2025-26
- Salary Calculator India — CTC breakdown with HRA, PF, TDS
- Section 80C Calculator — Maximize your ₹1.5 lakh 80C deduction