Tool
HRA Exemption Calculator
See exactly how much HRA is tax-exempt under Section 10(13A) — the minimum of three conditions — and how much tax it saves you.
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
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)
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.