HRA Exemption Calculator

How the exemption is worked out

House rent allowance is not exempt as such. Section 10(13A) exempts the least of three amounts, and the whole of the rest is ordinary taxable salary. The three are:

• the HRA actually received for the period;
• the rent paid, minus 10% of salary;
• 50% of salary in a metro, 40% of salary anywhere else.

One point of housekeeping. Section 10(13A) belongs to the Income-tax Act, 1961, repealed with effect from 1 April 2026; under the Income-tax Act, 2025 the same relief sits at Serial No. 11 of the Table in Schedule III rather than at a numbered section. The least-of-three structure stayed the same, but Rule 279 of the Income-tax Rules, 2026 expanded the 50% city list. We keep the old section number in the title because payslips, portal fields and searches still use it, while the period selector applies the correct city rule.

Because it is a least-of test, only one of the three ever decides your answer, and knowing which is more useful than the exemption itself. If the metro share binds, more rent changes nothing. If the rent limit binds, every extra rupee raises the exemption one for one. If the HRA received binds, the question is closed. The calculator marks the binding limit for that reason.

Take a Mumbai employee with an HRA salary base of ₹7,20,000 for the year, HRA of ₹2,88,000 and rent of ₹3,00,000 — ₹25,000 a month. The first limit is ₹2,88,000. The second is ₹3,00,000 minus 10% of ₹7,20,000, which is ₹3,00,000 less ₹72,000, or ₹2,28,000. The third is 50% of ₹7,20,000, or ₹3,60,000. The least of the three is ₹2,28,000, so that much is exempt and the remaining ₹60,000 of HRA is taxed like any other salary.

The 10% subtraction assumes you would have spent something on housing regardless, so the allowance only shelters rent above that floor. An employee paying rent of 10% of salary or less therefore gets nothing, whatever the HRA line on the payslip says.

The 50% city list changed on 1 April 2026

Two correct lists now circulate because they apply to different income periods. Old Rule 2A names Mumbai, Kolkata, Delhi and Chennai. That remains the list for FY 2025-26, which is the income reported in an AY 2026-27 return. Calling Bengaluru a 40% city for FY 2025-26 is therefore correct, but it is not a timeless statement.

For salary earned from 1 April 2026, Rule 279 adds Hyderabad, Pune, Ahmedabad and Bengaluru. The current Tax Year 2026-27 list is therefore all eight: Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru. Gurugram and Noida are still not listed; an NCR address is not automatically a Delhi address. Chandigarh, Jaipur and every other unlisted place also use the 40% share.

The transition can change a real answer. Someone with an HRA salary base of ₹7,20,000, HRA of ₹4,00,000 and rent of ₹6,00,000 has a third limit of ₹3,60,000 in Mumbai. In Bengaluru, the same limit was only ₹2,88,000 for FY 2025-26 but becomes ₹3,60,000 for income from 1 April 2026. Where that limit binds, the rule change raises the exemption by ₹72,000; at the top old-regime slab of 30% plus 4% cess, the difference is ₹22,464 of tax. Applying the new list to last year's return overstates the exemption; applying the old list to current salary understates it.

At moderate rents the distinction often does not bind at all. In the first worked example the exemption is ₹2,28,000 in a metro and ₹2,28,000 anywhere else, because the rent limit sits below both ₹3,60,000 and ₹2,88,000. Set the city selector both ways before you worry about it.

The salary base changes with the governing rule

Two of the three limits are percentages of salary, so its statutory definition carries the calculation. Do not enter gross salary or CTC. For FY 2025-26 / AY 2026-27, old Rule 2A uses basic pay, DA that forms part of retirement-benefit salary, and commission fixed as a percentage of turnover achieved by the employee under the employment terms.

For Tax Year 2026-27, Rule 279 says salary includes DA where the terms of employment provide for it and excludes other allowances and perquisites. Section 16 of the Income-tax Act, 2025 separately includes employer fees and commission in salary. The current rule therefore does not justify leaving out commission merely because it is variable pay. Confirm an unusual component where its legal character or payroll treatment is unclear.

In both periods, leave out HRA itself and the allowances or perquisites excluded by the governing rule. A large CTC does not automatically produce a large HRA base. Assemble the correct components from your payslips and employment terms, then enter the combined figure here.

Under the new regime the exemption is worth nothing

HRA exemption is available under the old regime only, and the new regime is the default. For most salaried people filing today the figure above is not a saving but a comparison input: tax you would save if you chose the old regime. A large exemption is one of the few things still capable of tipping that choice, particularly on a high basic with metro rent — so subtract it from salary income along with your other old-regime deductions and run both regimes properly, rather than switching on the strength of one number.

Receipts, your landlord's PAN and the paperwork

The exemption is claimed on evidence, and payroll teams ask for it before the year closes. Expect to produce rent receipts, and a rent agreement where the amounts are substantial. Once rent for the year crosses ₹1,00,000 you must also report your landlord's PAN; if the landlord will not give it, a declaration is required instead and the claim weakens considerably.

Higher up, the obligation changes shape entirely. A tenant paying more than ₹50,000 a month has to deduct tax at source at 2% and deposit it — the provision numbered 194-IB under the Income-tax Act, 1961, and a rate cut from 5% with effect from 1 October 2024, so older articles will quote you the wrong figure. It is the tenant, not the landlord, who is liable if a deduction was due and was not made. Pay by bank transfer where you can: cash rent with handwritten receipts and no agreement is the pattern that gets picked apart.

If you pay rent but receive no HRA

Section 10(13A) needs an allowance to exempt, so someone self-employed, or whose salary carries no HRA component, gets nothing from it — the figure above will read nil. The route in that case is Section 80GG, a deduction rather than an exemption, claimed on a prescribed declaration and available only where neither you nor your spouse or minor child owns residential accommodation at the place you work.

It has its own three-limb cap, shaped like this one but with a far lower ceiling. The deduction is the least of three amounts: ₹5,000 a month, which is ₹60,000 across the year; 25% of total income; and rent paid less a share of total income. That last fraction is not among our sourced values, so confirm it before planning around the section. A ₹60,000 ceiling makes 80GG a consolation rather than a substitute, and it is unavailable under the new regime — like HRA, an old-regime route only.

What this calculator cannot tell you

It answers one question — the least of three amounts, on the figures you entered. A fair amount sits outside it:

• A year that changed. A raise, a move between cities, or a house taken up in September needs the exemption worked out period by period and summed.
• Whether your claim will stand. Genuine occupation, a real landlord and an auditable payment trail are facts, not inputs.
• Your tax. The exempt amount reduces taxable salary; what that is worth depends on your slab, your other income and your regime.
• Your tenant-side obligations. Deducting, depositing and certifying tenant TDS sit outside this page.

Used for what it is good for — checking a payroll exemption, sizing a rent negotiation, seeing whether a metro posting changes your answer at all — the three-limit test is short enough to verify by hand in a minute, which is more than can be said for most of the tax code.