Tool

HRA Exemption Calculator

If you rent and your employer pays you House Rent Allowance, part of that HRA is not taxed at all. The catch is that the exempt amount is the smallest of three separate limits — so paying more rent, or getting more HRA, does not always increase what you save.

Put in your basic salary, HRA and rent, and this shows all three limits, which one is holding your exemption down, and the tax it saves you. Hover the ? on any field if you're unsure what to enter. The full explanation is below — including why this only works under the old tax regime.

Basic Salary (₹/mo) ? The line on your payslip marked “Basic” — not your total salary. It is usually 40–50% of CTC, and every HRA limit below is calculated from it.

HRA Received (₹/mo) ? The House Rent Allowance your employer actually pays you each month, shown as a separate line on the payslip. Commonly 40–50% of basic.

Rent Paid (₹/mo) ? Rent you pay your landlord each month. Your employer will want receipts, and the landlord’s PAN if annual rent crosses ₹1 lakh.

Income Tax Slab (%) ? The rate charged on your last rupee of income. Under the old regime, where HRA exemption applies, taxable income of ₹5–10 lakh sits at 20% and anything above ₹10 lakh at 30%.

City Type ? Only Mumbai, Delhi, Chennai and Kolkata count as metro for this rule — they allow 50% of basic instead of 40%. Bengaluru, Pune and Hyderabad are non-metro here, however expensive their rents.

Metro (50% of basic) Non-Metro (40% of basic)

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Annual HRA Exempt ? The part of your yearly HRA that is never taxed — the smallest of the three limits in the chart below.

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Taxable HRA (Annual) ? The leftover HRA that gets added to your income and taxed like salary. Higher rent usually shrinks this.

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Annual Tax Saved ? Rupees you keep because of the exemption — the exempt amount multiplied by your tax slab, plus the 4% cess. Only applies if you file under the old regime.

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Binding Condition ? Which of the three limits is the smallest, and therefore the one capping your exemption. Change that number and your exemption moves; change the others and nothing happens.

Exemption = minimum of the three bars above. Available only under the Old Tax Regime. Not applicable if you own a home in the same city.

How HRA exemption works

House Rent Allowance is a salary component specifically designed to cover rent costs. It is partially or fully exempt from income tax — but only under the old regime, and only if you are actually paying rent. The exemption is not the entire HRA you receive; it is the lowest of three conditions defined by the Income Tax Act.

In practice, condition 3 (rent paid minus 10% of basic) is often the binding constraint — meaning paying higher rent directly increases your exemption, up to the limits set by conditions 1 and 2.

The formula — Section 10(13A), Rule 2A

HRA Exemption = Minimum of three conditions Condition 1: Actual HRA received from employer
Condition 2: 50% of basic salary (metro) or 40% of basic (non-metro)
Condition 3: Actual rent paid − 10% of basic salary
HRA Exempt = min(C1, C2, C3)

Example — Metro city, 20% slab:
Basic = ₹40,000/month · HRA received = ₹20,000/month · Rent paid = ₹25,000/month
C1: ₹20,000 × 12 = ₹2,40,000/yr
C2: 50% × ₹40,000 × 12 = ₹2,40,000/yr
C3: (₹25,000 − 10% × ₹40,000) × 12 = (₹25,000 − ₹4,000) × 12 = ₹2,52,000/yr
HRA exemption = min(₹2.4L, ₹2.4L, ₹2.52L) = ₹2,40,000/yr
Tax saved (20% slab + cess) = ₹2,40,000 × 20.8% = ₹49,920/yr

Metro vs non-metro — why it matters

The four metro cities for HRA purposes are Mumbai, Delhi, Chennai, and Kolkata. If you live there, condition 2 allows 50% of basic. For all other cities (Bengaluru, Hyderabad, Pune, Ahmedabad, etc.), it's 40% of basic. This is defined in Rule 2A of the Income Tax Rules, 1962 and has not been updated since 1962 — Bengaluru's notoriously high rents get no special treatment.

How to maximise HRA exemption

The most overlooked optimisation: if you pay rent to a family member (parents, spouse), you can claim HRA exemption — but only if the property is genuinely owned by them and rent is actually paid. The landlord must declare rental income in their tax return. As per CBDT circular, paying rent to parents is a legitimate tax-saving strategy if the transaction is genuine. Do not claim HRA while paying rent to your spouse — courts have consistently disallowed this.

Frequently Asked Questions

Can I claim HRA under the new tax regime?

No. HRA exemption under Section 10(13A) is not available under the new tax regime. If your HRA exemption is large (₹2L+), this alone may be reason enough to stick with the old regime. Use the salary calculator to compare both regimes for your specific numbers.

What if I don't submit rent receipts to my employer?

Your employer will deduct TDS on the full HRA as taxable income. You can still claim the exemption when filing your ITR (Form 16 won't reflect it, but you can compute and claim it directly). Rent receipts are required for HRA above ₹1 lakh/year (₹8,333/month), where the landlord's PAN is also mandatory.

I own a house — can I still claim HRA?

Yes, if your owned house is in a different city from where you work. A common scenario: you own a home in your hometown, but rent in the city where you work. Both the HRA exemption (for your rented accommodation) and home loan deductions (for your owned home) can be claimed simultaneously.

What if my rent exceeds my HRA received?

Condition 1 caps the exemption at actual HRA received — you can't claim more than your employer pays you as HRA. However, condition 3 (rent paid − 10% of basic) can still reduce your taxable income via HRA even if rent exceeds HRA. The binding condition depends on which of the three is lowest.

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