HRA Calculator — House Rent Allowance Tax Exemption
📜 Income Tax Act source for HRA exemption
The exemption is the least of three amounts under Section 10(13A) of the Income Tax Act read with Rule 2A: actual HRA received; rent paid minus 10% of basic salary; and 50% of basic (metro: Delhi, Mumbai, Kolkata, Chennai) or 40% (non-metro). Official reference: incometax.gov.in. Available in the old regime only. Last verified: June 2026.
How does the HRA exemption formula work?
Section 10(13A) of the Income Tax Act exempts the least of three amounts from tax: Need to continue this calculation? Try the Income Tax Calculator India or the Salary Calculator.
| Test | Formula | Example (₹50k basic, ₹20k HRA, ₹18k rent, non-metro) |
|---|---|---|
| 1. Actual HRA | HRA received | ₹20,000 |
| 2. Rent excess | Rent − 10% of basic | ₹18,000 − ₹5,000 = ₹13,000 |
| 3. City cap | 40%/50% of basic | 40% × ₹50,000 = ₹20,000 |
| Exempt | Least of 1–3 | ₹13,000/month |
The remaining ₹7,000/month HRA is added to taxable salary. Annual exemption here: ₹1.56 lakh — saving roughly ₹48,672 at the 30% slab including cess.
How can you maximise HRA exemption legally?
Match rent to the formula: exemption rises with rent until rent equals (city% + 10%) of basic — beyond that, test 3 caps it. Restructure salary: if your HRA component is far below 40–50% of basic, ask HR to rebalance — excess HRA beyond the caps is simply taxed. Document everything: rent receipts, lease agreement, bank transfers, and landlord PAN (rent > ₹1L/year).
What if you do not receive HRA at all?
Self-employed people, or employees without an HRA component, can claim Section 80GG instead: the least of ₹5,000/month, 25% of total income, or rent minus 10% of income — old regime only, and you (or spouse/minor child) must not own a house in your work city.
HRA vs new tax regime: the break-even question
The new regime offers lower slab rates but no HRA exemption. Rough rule: if HRA exemption + 80C (₹1.5L) + 80D + home-loan interest together exceed ₹4.5 lakh, the old regime usually wins. Run both through the income tax calculator before opting.
What documents do you need to claim HRA?
For employer-level exemption (reflected in Form 16): monthly rent receipts with revenue stamp where required, the lease/rent agreement, landlord PAN if annual rent exceeds ₹1 lakh, and bank statements showing rent transfers. Cash rent above ₹8,000–10,000/month invites scrutiny; bank transfers are near-mandatory evidence now that AIS cross-matches landlord rental income. If you forgot to submit proofs to HR, you can still claim the exemption directly in your ITR — keep the documents for any notice.
What is the TDS rule when rent exceeds ₹50,000/month?
Section 194-IB requires individual tenants paying rent above ₹50,000/month to deduct 2% TDS (rate reduced from 5% in Budget 2024) once a year — in the last month of tenancy or March — and deposit it via Form 26QC with Form 16C to the landlord. Skipping this attracts interest and late fees on you, the tenant, not the landlord.
Common HRA mistakes that trigger tax notices
Round-figure fabricated rent to exactly exhaust the exemption — AIS matching now flags landlords who do not declare the corresponding rental income. Paying parents without their tax declaration — valid only if the parent owns the property and reports the income. Claiming HRA while living in your own house in the same city — disallowed outright. Both spouses claiming the same rent — the exemption follows who actually pays; split claims need split payments. The cleanest position: real rent, bank trail, landlord PAN, consistent figures across employer proofs and ITR.
How does HRA interact with home-loan benefits?
You can legitimately claim both when: your owned house is in another city; or it is rented out (its rent becomes your taxable income, and Section 24(b) interest deduction applies against it); or genuine commuting distance forces you to rent near work. Same-city claims with a self-occupied owned flat are the classic disallowed pattern.
Worked examples across three cities
| Case | Basic/mo | HRA/mo | Rent/mo | City | Exempt/mo | Binding limit |
|---|---|---|---|---|---|---|
| Mumbai renter | ₹80,000 | ₹40,000 | ₹35,000 | Metro 50% | ₹27,000 | Rent − 10% basic |
| Bengaluru techie | ₹60,000 | ₹24,000 | ₹30,000 | Non-metro 40% | ₹24,000 | Actual HRA |
| Delhi junior | ₹30,000 | ₹15,000 | ₹12,000 | Metro 50% | ₹9,000 | Rent − 10% basic |
Note the Bengaluru case: rent is high enough that the HRA component itself becomes the cap — a salary restructure raising HRA to ₹27,000 would lift the exemption by ₹3,000/month at zero extra cost to the employer.
HRA in special situations
Mid-year city or rent change: compute month-wise, not annually — each month uses that month’s rent, basic, and city class. Two houses (job posting): claim HRA for the work-city rental; the home-city owned house follows self-occupied/let-out rules independently. Company-leased accommodation: no HRA — a perquisite valuation applies instead; compare both structures before opting. Hostel/PG without formal agreement: exemption still valid with receipts and bank trail, though monthly invoices from the operator strengthen the file.
Quick HRA optimisation checklist
✔ Rent at least 10% of basic + the binding-limit margin — exemption is zero when rent ≤ 10% of basic. ✔ Bank-transfer every payment with “rent for [month]” in the narration. ✔ Collect landlord PAN before the ₹1 lakh/year threshold bites, not at proof-submission panic time. ✔ Deduct 2% TDS once a year if rent > ₹50,000/month (Form 26QC). ✔ Re-run the old-vs-new regime comparison every April — the break-even moves with each Budget. ✔ If your HRA component is under 40% of basic and you pay high rent, request a salary restructure; it costs the employer nothing. ✔ Keep the agreement, receipts, and bank trail for 6 years — the standard reassessment window.
HRA glossary in 60 seconds
Basic+DA: the salary base for all three exemption tests — allowances and bonuses are excluded. Metro: only Delhi, Mumbai, Kolkata, Chennai for Section 10(13A). Form 12BB: the declaration you file with your employer listing rent and landlord details for TDS adjustment. AIS: the Annual Information Statement where your claimed rent now cross-matches your landlord’s reported income. Section 80GG: the fallback rent deduction (max ₹60,000/year) when no HRA is received. 26QC/16C: the tenant TDS challan and certificate pair for rent above ₹50,000/month.
Frequently asked questions
How is HRA exemption calculated?
The exempt amount is the LEAST of: actual HRA received; rent paid minus 10% of basic+DA; and 50% of basic+DA (metro) or 40% (non-metro). The remainder of HRA is added to taxable salary. The comparison is done on annual figures, or month-wise if salary/rent changed during the year.
Is Bengaluru a metro for HRA purposes?
No. Only Delhi, Mumbai, Kolkata, and Chennai qualify for the 50% limit under Section 10(13A). Bengaluru, Hyderabad, Pune, Gurugram, and Noida all use the 40% non-metro limit despite their living costs.
Can I claim HRA in the new tax regime?
No. HRA exemption under Section 10(13A) is available only in the old regime. If your HRA exemption + other deductions exceed roughly ₹4–4.5 lakh, the old regime often beats the new one — calculate both before choosing.
Can I claim HRA if I pay rent to my parents?
Yes, if the arrangement is genuine: pay by bank transfer, your parent owns the house, and they declare the rent as income in their return. The taxman scrutinises cash payments to parents without documentation.
Do I need the landlord PAN to claim HRA?
If annual rent exceeds ₹1 lakh, you must report the landlord PAN to your employer. If rent exceeds ₹50,000/month, you must also deduct TDS at 2% (Section 194-IB) when paying rent.
Can I claim both HRA and home loan benefits?
Yes — if you genuinely live in a rented house in your work city while your owned (loan-funded) house is in another city or occupied by family. Both HRA exemption and Section 24(b) interest deduction can apply simultaneously.
Related calculators
📋 Tax disclaimer: This calculator provides estimates based on published rates and rules for FY 2025-26 and is not tax, legal, or investment advice. Tax outcomes depend on your complete circumstances — consult a chartered accountant or registered tax practitioner before filing. Sources: Income Tax Act, CBDT/CBIC notifications — see methodology.
Sources & References
- Income Tax Act — Section 10(13A) & Rule 2A — Least-of-three rule: actual HRA; rent paid minus 10% salary; 50%/40% salary (metro/non-metro)
- CBDT — HRA Exemption Circular — Guidelines on HRA documentation and metro city classification