Find your house rent allowance exemption
₹1,80,000
HRA exemption
Limited by rent paid minus 10% of salary
₹60,000
Taxable HRA
| HRA received | ₹2,40,000 | |
| 50% of salary (metro) | ₹3,00,000 | |
| Rent paid − 10% of salary | ₹1,80,000 | ← lowest, so this applies |
HRA exemption exists only under the old tax regime. If you have opted for the new regime, none of this applies and the whole HRA is taxable.
HRA exemption is not simply the rent you pay, nor the allowance your employer gives you. It is the lowest of three separate amounts, and most people compute one of them and stop — usually the wrong one. This works out all three, shows you which is binding, and tells you how much of your HRA remains taxable. It matters most in January and February, when employers ask for rent proofs and the number you claim has to hold up.
Why the third limit usually decides it
Of the three tests, rent paid minus ten percent of salary is the one that most often binds, and it is the one people least expect. Consider someone on ₹6 lakh basic in Mumbai receiving ₹3 lakh HRA and paying ₹20,000 a month. Their HRA is ₹3 lakh, half their salary is ₹3 lakh, but rent minus ten percent of salary is ₹2.4 lakh minus ₹60,000, or ₹1.8 lakh. That last figure is the exemption. Raising the HRA component would change nothing; only paying more rent would.
The metro list is statutory, not sensible
For HRA purposes exactly four cities are metros: Delhi, Mumbai, Kolkata and Chennai. The list was written decades ago and has not moved, which means Bengaluru and Hyderabad — where rents now rival Mumbai's — are treated as non-metro and capped at forty percent of salary rather than fifty. Nothing about local cost of living changes this, and claiming fifty percent because a city feels metropolitan is a straightforward way to have the exemption disallowed.
What to keep on file
Rent receipts for the full year, the rent agreement, and proof of payment — ideally bank transfers rather than cash, because a transfer trail is what survives questioning. Where annual rent exceeds ₹1 lakh you also need the landlord's PAN. Employers collect these in the final quarter, but the requirement is the same if you claim the exemption yourself while filing, and reconstructing a year of receipts in July is considerably harder than keeping them as you go.
Frequently asked questions
- What are the three limits?
- The HRA your employer actually pays; 50% of basic plus DA if you live in a metro or 40% if you do not; and rent paid minus 10% of basic plus DA. Your exemption is whichever of the three is smallest.
- Which cities count as metros?
- Only Delhi, Mumbai, Kolkata and Chennai. Bengaluru, Hyderabad, Pune and Gurugram are non-metro for this purpose despite their rents, so the limit is 40%, not 50%.
- Can I claim HRA under the new tax regime?
- No. The new regime removed the exemption entirely. This calculator is only relevant if you have stayed on the old regime, and claiming HRA while on the new one is the most common error now.
- Why is my exemption zero when I pay rent?
- Because rent minus 10% of salary is one of the three limits. If your rent is less than a tenth of your basic plus DA, that limit is zero or negative, and no exemption is available however large your HRA component is.
- Do I need my landlord's PAN?
- Yes, if annual rent exceeds ₹1 lakh. Without it the employer is entitled to refuse the exemption at source, though you can still claim it when filing if you have proof of payment.
- Can I claim HRA while paying a home loan?
- Yes, if you genuinely rent where you work and own a property elsewhere — or let out the one you own. Both deductions can be claimed together, and this is legitimate provided the facts support it.
- Can I pay rent to my parents?
- Yes, if they own the property and declare the rent as income. It must be a real arrangement with real payments; a paper transaction is exactly what scrutiny looks for.