TaxSaral
Tax Year 2026-27·Income Tax Act 2025·Schedule III

HRA Exemption Calculator

Find how much of your House Rent Allowance is exempt from tax under the optional regime.

For guidance only. HRA exemption applies only under the optional (old) regime. Verify with a CA before filing.

Salary & Rent Details

Enter annual amounts (monthly × 12)

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HRA exemption is calculated as a percentage of your basic salary

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₹

Must be paying rent to claim HRA exemption

Metro cities: Delhi, Mumbai, Kolkata, Chennai, Bangalore, Pune, Hyderabad, Ahmedabad

Enter your basic salary and HRA to see the exemption

Understanding HRA Exemption

HRA is part of your salary package meant to cover rent costs. The law provides a partial tax exemption — but only under the optional regime and only if you actually pay rent.

Optional regime only

HRA exemption applies only under the optional regime (Schedule III, IT Act 2025). Under the default regime, HRA received is fully taxable.

Minimum of 3 amounts

The exempt portion is the LOWEST of: (1) actual HRA received, (2) 50% or 40% of basic salary, and (3) actual rent paid minus 10% of basic salary.

Metro vs non-metro

8 cities get the 50% rate: Delhi, Mumbai, Kolkata, Chennai, Bangalore, Pune, Hyderabad, Ahmedabad. All others use 40%.

The HRA Exemption Formula

Exempt HRA = Minimum of:

  1. Actual HRA received — as per your salary slip or Form 16
  2. 50% of basic salary (metro cities) or 40% of basic salary (non-metro cities)
  3. Actual rent paid minus 10% of basic salary

The remaining HRA (total received minus exempt amount) is added to your taxable income under “Salaries”.

Worked example (Bangalore)

ConditionAmount
Basic salary (annual)₹6,00,000
HRA received (annual)₹2,40,000
Actual rent paid (annual)₹2,00,000
Condition 1 — actual HRA₹2,40,000
Condition 2 — 50% of basic (metro)₹3,00,000
Condition 3 — rent minus 10% of basic₹2,00,000 − ₹60,000 = ₹1,40,000
Exempt HRA (minimum of 3)₹1,40,000
Taxable HRA (₹2,40,000 − ₹1,40,000)₹1,00,000

Common questions

Is HRA exemption available under the default (new) regime?+
No. HRA exemption is only available under the optional (old) regime. If you have chosen the default regime for Tax Year 2026-27, your entire HRA is taxable. This is one of the major deductions that might make the optional regime more attractive for you — use the Regime Optimizer to compare.
What counts as 'basic salary' for the HRA formula?+
Under the Income Tax Act 2025, 'basic salary' for HRA purposes typically means basic pay plus dearness allowance (DA). Commission based on a fixed percentage of sales turnover is also included. Performance bonuses, HRA itself, and most allowances are excluded. Check your salary slip or Form 16 for the components your employer considers as basic for TDS purposes.
What are the 8 metro cities for the 50% rate?+
Delhi (including NCR), Mumbai (including Navi Mumbai and Thane), Kolkata, Chennai, Bangalore, Pune, Hyderabad, and Ahmedabad. If you live in any other city, the rate is 40% of basic salary. The classification is based on the city you actually live in, not your employer's headquarters.
Can I claim HRA if I pay rent to a parent or family member?+
Yes, you can pay rent to a parent and claim HRA exemption — provided the tenancy is genuine, your parent owns the property, and rent is actually transferred. The rental income must be declared by your parent in their own tax return. Paying rent to a spouse is generally not accepted as it may be challenged.
Is a landlord's PAN mandatory?+
If your annual rent exceeds ₹1 lakh per year (₹8,333 per month), you must provide your landlord's PAN to your employer. If the landlord does not have a PAN, a declaration to that effect can be submitted, but your employer may not grant the full exemption. Keep rent receipts as supporting documentation.
What if I own a house but rent another place for work?+
You can still claim HRA if you live in a rented accommodation, even if you own a property elsewhere — for example, if you own a house in your hometown but rent an apartment in the city where you work. The exemption is based on where you actually live and pay rent.
Legal reference: Schedule III, Rule 3 — HRA exemption formula · Income Tax Act 2025, Tax Year 2026-27. Metro city classification follows Central Government notifications as adopted by the 2025 Act.