HRA Calculator

Important update (April 2026): Per the revised tax rules effective April 1, 2026, Bengaluru, Hyderabad, Pune, and Ahmedabad now qualify for the 50% HRA exemption metro rate, joining Mumbai, Delhi, Kolkata, and Chennai.

Reviewed by: CalcMojo Editorial Team

If you live in any of these eight cities, select "Metro" in the calculator below. All other cities continue to use the 40% non-metro rate. Calculation logic (the three-way minimum formula under Section 10(13A)) is unchanged.

House Rent Allowance (HRA) is one of the most significant tax-saving components in a salaried employee’s pay structure, yet it is also one of the most commonly misunderstood. This HRA calculator computes your exact HRA exemption under Section 10(13A) of the Income Tax Act, showing how much of your HRA is tax-free and how much is taxable based on your basic salary, HRA received, rent paid, and the city you live in.

The HRA exemption is calculated as the minimum of three amounts: the actual HRA received from your employer, 50% of basic salary for metro cities (40% for non-metro), or rent paid minus 10% of basic salary. Many employees leave money on the table by not understanding which of these three applies to their situation or by not claiming HRA at all when they are paying rent.

Whether you are optimizing your salary structure with your employer, planning rent amounts for tax efficiency, deciding between the old and new tax regimes, or simply checking if your employer has calculated your HRA exemption correctly, this tool gives you the precise numbers. Under the new tax regime, HRA exemption is not available, which makes this calculation crucial for deciding which regime benefits you more. Pair this with the Income Tax Calculator (Old vs New) for a complete tax comparison.

How HRA Exemption Is Calculated

HRA exemption under Section 10(13A) of the Income Tax Act is the minimum of three amounts calculated for each month or period where the salary components remain unchanged.

The Three-Way Minimum:

  1. Actual HRA received from your employer during the year
  2. 50% of basic salary if you live in a metro city (Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, or Ahmedabad — updated April 2026) or 40% of basic salary for all other cities
  3. Rent paid minus 10% of basic salary during the year

The exempt amount is the lowest of these three figures. The remainder (HRA received minus exemption) is taxable as part of your salary income.

Example Calculation:

Consider an employee in Mumbai with:

  • Basic salary: ₹50,000 per month (₹6,00,000 per year)
  • HRA received: ₹25,000 per month (₹3,00,000 per year)
  • Rent paid: ₹20,000 per month (₹2,40,000 per year)

The three amounts:

  1. Actual HRA: ₹3,00,000
  2. 50% of basic (metro): ₹3,00,000
  3. Rent paid minus 10% of basic: ₹2,40,000 – ₹60,000 = ₹1,80,000

The minimum is ₹1,80,000, so the HRA exemption is ₹1,80,000. The remaining ₹1,20,000 (₹3,00,000 minus ₹1,80,000) is taxable.

For someone in the 30% tax bracket, this ₹1,80,000 exemption saves approximately ₹56,160 in tax (including cess). This is a substantial saving that many employees overlook or miscalculate.

Maximizing Your HRA Tax Benefit

Understanding the three-component formula reveals clear strategies for maximizing your exemption.

Strategy 1: Restructure Your Salary. If your employer allows flexible salary structuring, request a higher HRA allocation relative to other taxable components. A higher HRA received increases component 1 of the formula. However, this only helps if your rent is high enough to keep component 3 competitive — otherwise, the exemption is capped by rent minus 10% of basic regardless.

Strategy 2: Ensure Your Rent Is Above 10% of Basic. Component 3 (rent minus 10% of basic) becomes zero or negative if your rent is less than or equal to 10% of basic salary. If your basic is ₹40,000 per month, you need to pay more than ₹4,000 in rent for any HRA exemption at all. In most cities, actual rent far exceeds this threshold, but in smaller towns or when living with family and paying nominal rent, this can be relevant.

Strategy 3: Pay Rent to Family Members. If you live in a house owned by your parents, you can pay rent to them and claim HRA exemption. The rent paid must be genuine (with a rental agreement), and your parents must declare the rental income in their ITR. If your parents are in a lower tax bracket or below the exemption limit, the family saves tax overall. This is a legitimate and commonly used strategy upheld by the Income Tax Appellate Tribunal in multiple rulings.

Strategy 4: Claim HRA When You Have a Home Loan. A common misconception is that you cannot claim HRA if you own a home. You absolutely can if you live in a rented property (perhaps because your owned home is in a different city, under construction, or rented out). You can claim both HRA exemption on rent paid and Section 24(b) deduction on home loan interest simultaneously, provided the rented property and owned property are different.

Documents Required for HRA Claim

If Annual Rent Exceeds ₹1,00,000:

  • Landlord’s PAN number (mandatory)
  • Rent receipts for each month or quarter
  • Rental agreement (recommended but not always mandatory for employer submission)

If Annual Rent Is Below ₹1,00,000:

  • Rent receipts are sufficient
  • Landlord’s PAN is not mandatory but recommended

For Rent Paid to Family Members:

  • A formal rental agreement between you and the family member
  • Rent receipts or bank transfer records
  • The family member’s PAN
  • The family member must declare the rental income in their ITR

Common Documentation Mistakes:

Many employees lose their HRA exemption or face IT scrutiny due to documentation gaps. Ensure rent receipts are signed by the landlord, include the landlord’s full name, address, and PAN (if applicable), specify the rental period and amount, and are generated monthly or quarterly, not as a single lump-sum receipt for the entire year.

HRA and the New Tax Regime

The new tax regime under Section 115BAC does not allow HRA exemption. If you opt for the new regime, your entire HRA received is taxable as salary income.

This makes HRA a critical factor in choosing between the old and new regimes. For employees paying significant rent in metro cities, the HRA exemption alone can run ₹1.5 lakh to ₹3 lakh per year. Combined with other old-regime deductions (80C, 80D, Section 24), the old regime may save substantially more tax.

Breakeven Analysis:

Consider an employee earning ₹15 lakh annual basic salary in Mumbai, paying ₹30,000 per month in rent:

  • HRA exemption under old regime: approximately ₹2,40,000
  • 80C investments: ₹1,50,000
  • 80D health insurance: ₹25,000
  • Standard deduction (old): ₹50,000
  • Total deductions and exemptions: ₹4,65,000

Under the new regime, the only deduction is the standard deduction of ₹75,000. The difference of nearly ₹3,90,000 in deductions means the old regime saves approximately ₹1,17,000 in tax for this individual. Use the Income Tax Calculator (Old vs New) to run your specific numbers.

HRA for Employees in Shared Accommodation

In metro cities, many young professionals share apartments to manage high rents. HRA claims in shared accommodation are perfectly valid but require specific documentation.

If Each Tenant Has a Separate Agreement with the Landlord: Each tenant claims HRA based on their individual rent amount per their agreement. This is the cleanest approach.

If One Person Holds the Lease: The primary tenant can claim HRA for the full rent. Subtenant arrangements (where the primary tenant collects from others) are more complex. It is advisable for each individual to have a direct rental agreement with the landlord for HRA purposes.

What If You Share Rent With Your Spouse? If both spouses receive HRA and pay rent for the same property, both can claim HRA exemption if the rental agreement is in both names or if they have separate agreements. The total rent claimed by both should not exceed the actual rent paid.

HRA for Employees Living in Their Own City

If you live and work in the same city where you own a home, you generally cannot claim HRA because you are not paying rent. However, there are situations where you can:

You own a home but live in a rented property closer to your workplace. This is common in large cities like Mumbai and Bangalore where commute times can be extreme. You can claim HRA on the rent paid for the rented property. If your owned home is rented out, you declare that rental income separately.

Your home is under construction. While your home is being built, you live in a rented property. HRA exemption is available on the rent paid. Once construction is complete and you move in, the HRA exemption stops (unless you choose to continue renting elsewhere).

You own a home in a different city. If your employer transfers you to a new city and you rent there, HRA exemption is available regardless of owning a property elsewhere.

HRA Calculation for Part of the Year

If any component changes mid-year (salary revision, change of city, change of rent), HRA exemption must be calculated separately for each period.

Scenario: Salary Revision in October

  • April to September: Basic ₹40,000, HRA ₹20,000, Rent ₹18,000 (non-metro)
  • October to March: Basic ₹45,000, HRA ₹22,500, Rent ₹18,000 (non-metro)

For April to September:

  1. HRA: ₹20,000 x 6 = ₹1,20,000
  2. 40% of basic: ₹40,000 x 40% x 6 = ₹96,000
  3. Rent minus 10%: (₹18,000 – ₹4,000) x 6 = ₹84,000

Exemption: ₹84,000

For October to March:

  1. HRA: ₹22,500 x 6 = ₹1,35,000
  2. 40% of basic: ₹45,000 x 40% x 6 = ₹1,08,000
  3. Rent minus 10%: (₹18,000 – ₹4,500) x 6 = ₹81,000

Exemption: ₹81,000

Total annual exemption: ₹84,000 + ₹81,000 = ₹1,65,000

This split calculation is important because using annualized figures can give an incorrect exemption amount. Many payroll systems handle this automatically, but always verify against your Form 16.

This calculator provides estimates based on FY 2025-26 tax slabs. Consult a Chartered Accountant before filing.

Frequently Asked Questions

How is HRA exemption calculated?

HRA exemption is the minimum of three amounts: actual HRA received, 50% of basic salary for metro cities (40% for non-metro), or rent paid minus 10% of basic salary. The exempt portion is not taxed; the remainder is added to taxable salary income.

Can I claim HRA if I pay rent to my parents?

Yes, you can claim HRA by paying rent to your parents if they own the house. A formal rental agreement, rent receipts, and bank transfers are required as proof. Your parents must declare the rental income in their ITR. This is a legitimate strategy upheld by tax authorities.

Is HRA available under the new tax regime?

No, HRA exemption under Section 10(13A) is not available under the new tax regime. If you opt for the new regime, your entire HRA received is taxable. This makes HRA a key factor in deciding between old and new regimes.

What documents do I need for HRA claim?

Rent receipts for each month or quarter, signed by the landlord. If annual rent exceeds ₹1,00,000, the landlord’s PAN is mandatory. A rental agreement is recommended. For rent paid to family, include bank transfer records and the family member’s PAN.

Can I claim HRA if I own a house and pay a home loan?

Yes, you can claim both HRA exemption and home loan interest deduction under Section 24(b) simultaneously, provided the rented property and owned property are different. This commonly applies when you own a home in one city but work and rent in another.

What is the difference between HRA exemption for metro and non-metro cities?

Metro cities allow 50% of basic salary as the second component of the HRA calculation. Non-metro cities allow only 40%. As of April 1, 2026, eight cities qualify as metros for HRA purposes: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad (the latter four were added in the April 2026 revision). All other cities use the 40% rate. Employees in metros get a higher potential exemption, reflecting the higher cost of living and rent in these cities.

Do I need rent receipts if my rent is low?

If your annual rent is below ₹1,00,000, rent receipts are sufficient without the landlord’s PAN. However, maintaining proper documentation including receipts and a rental agreement is always advisable in case of any IT department inquiry.

Can both spouses claim HRA for the same rented property?

Yes, if both spouses receive HRA as part of their salary and both contribute to the rent, they can each claim HRA exemption. The rental agreement should ideally include both names, and the combined rent claimed should not exceed the actual rent paid.

Default rates shown are illustrative. Always verify current rules with your tax advisor. Data accurate as of: March 2026