HRA Calculator
Calculate your HRA exemption for tax saving. See which of the 3 rules gives you maximum exemption under old regime.
🏠HRA Details (Monthly)
Monthly Exemption
₹12.5K
Tax Saved (30% slab)
₹46.8K
HRA Exemption Rules
HRA exemption is the MINIMUM of these three:
📌 Important Note
HRA exemption is only available under the OLD tax regime. The new regime does not allow HRA exemption.
This portion of HRA will be added to your taxable income.
How the HRA Calculator Works
What HRA Exemption Is and Who Can Claim It
House Rent Allowance (HRA) is a salary component that employers provide to help employees pay for rented accommodation. Under Section 10(13A) of the Income Tax Act, a portion of the HRA received is exempt from tax — but only if you actually pay rent and only under the old tax regime.
The exemption exists to encourage renting over buying, at least from a tax perspective. If you're a salaried employee paying rent, you can reduce your taxable income by the exempt portion of your HRA. This can save ₹30,000–₹1,00,000+ in tax annually depending on your salary and rent.
Important: HRA exemption is NOT available under the new tax regime (default from FY 2024-25). If you've opted for the new regime, you can't claim it. If you're on the old regime and pay rent, HRA exemption is one of the largest tax benefits available to you.
The Three Rules — HRA Exemption Is the Minimum
The HRA exemption amount is not a fixed formula — it's the minimum of three separate calculations. This design ensures the exemption is reasonable and tied to both the rent you pay and your salary structure.
**Rule 1: Actual HRA received.** This is the HRA component in your salary — usually 40–50% of basic for most employers. On a ₹50,000 basic with ₹20,000 HRA, Rule 1 gives ₹20,000/month = ₹2,40,000/year.
**Rule 2: Rent paid minus 10% of basic salary (plus DA).** This rule ensures the exemption is tied to actual rent paid, with a floor of 10% of basic that you're considered to bear anyway. If rent is ₹18,000/month and basic is ₹50,000/month, Rule 2 = (₹18,000 × 12) − (10% × ₹50,000 × 12) = ₹2,16,000 − ₹60,000 = ₹1,56,000.
**Rule 3: 50% of basic (metro) or 40% of basic (non-metro).** This rule caps the exemption based on the 'typical' rent cost in the city. Delhi, Mumbai, Chennai, and Kolkata are metro (50%); all others are non-metro (40%). On ₹50,000 basic in a metro: 50% × ₹6,00,000 = ₹3,00,000.
The exemption is the MINIMUM of these three. In our example: min(₹2,40,000, ₹1,56,000, ₹3,00,000) = ₹1,56,000. That's what's exempt from tax.
Documents Required and Common Mistakes
To claim HRA exemption, you need: (1) a rent agreement with your landlord, (2) monthly rent receipts, and (3) if annual rent exceeds ₹1 lakh, your landlord's PAN. Without these documents, your employer may not allow the exemption, and the IT Department can disallow it during assessment.
You can pay rent to your parents and claim HRA, provided you have a valid rent agreement, actual money transfers (bank transfers are safest), and your parents declare the rental income in their tax return. This is a legal and common strategy, especially for people living in family-owned homes.
Common mistakes: not keeping rent receipts (essential if rent exceeds ₹1 lakh/year); claiming HRA under the new regime (not allowed); forgetting that the exemption is based on annual figures, not monthly; and misclassifying metro vs non-metro cities. Getting any of these wrong can cost you tens of thousands of rupees in denied tax savings.
Step-by-Step Worked Example
Priya works in Bangalore (non-metro) with a monthly basic salary of ₹60,000, DA of ₹5,000, and receives HRA of ₹24,000/month. She pays ₹22,000/month in rent. Calculate her annual HRA exemption.
- 1Annual Basic + DA = (₹60,000 + ₹5,000) × 12 = ₹7,80,000.
- 2Annual HRA received = ₹24,000 × 12 = ₹2,88,000.
- 3Annual rent paid = ₹22,000 × 12 = ₹2,64,000.
- 4Rule 1: Actual HRA received = ₹2,88,000.
- 5Rule 2: Rent paid − 10% of Basic+DA = ₹2,64,000 − (10% × ₹7,80,000) = ₹2,64,000 − ₹78,000 = ₹1,86,000.
- 6Rule 3: 40% of Basic+DA (non-metro) = 40% × ₹7,80,000 = ₹3,12,000.
- 7Exemption = min(₹2,88,000, ₹1,86,000, ₹3,12,000) = ₹1,86,000.
Result
HRA received: ₹2,88,000
HRA exemption: ₹1,86,000 (limited by Rule 2)
Taxable HRA: ₹1,02,000
Tax saved at 30% slab (with cess): ₹58,032
Note: Rule 2 is often the binding constraint. Higher rent increases the exemption.
Key Benefits & Use Cases
When to Use This Tool
- ✓Reducing taxable income as a salaried employee paying rent.
- ✓Determining whether the old or new tax regime is better for you.
- ✓Planning rent negotiations — higher rent can mean higher HRA exemption (up to a point).
- ✓Verifying your employer's HRA exemption calculation is correct.
- ✓Comparing salary structures — HRA-heavy vs allowance-heavy structures.
Why It Matters
- →Significant tax saving — ₹50,000–₹1,00,000+ per year for most rent-paying employees.
- →Transparent formula — you can calculate and verify the exemption yourself.
- →Landlord's income tax status doesn't affect your exemption.
- →Available even if you rent from family (with proper documentation).
- →Stacks with other deductions (80C, 80D) for compound tax savings.
Who Should Use This Calculator
- ★Salaried employees on the old tax regime who pay rent.
- ★Job seekers comparing CTC offers and effective take-home pay.
- ★Anyone planning to switch between old and new tax regimes.
- ★Employees who rent from family members and want to claim the exemption legally.
3 Rule Comparison
See all three HRA exemption rules and which gives you the best benefit.
Metro/Non-Metro
Different calculation for metro cities (50%) vs others (40%).
Tax Savings
See exact tax savings based on your income tax bracket.
How to Use
Enter Salary
Set monthly basic, DA, and HRA received.
Enter Rent
Set the monthly rent you pay.
Select City
Choose metro or non-metro city.
View Exemption
See HRA exemption and tax savings.
The Formula
HRA Exempt = MIN(HRA received, Rent-10% Basic, 50/40% Basic)Frequently Asked Questions
What is HRA exemption?
HRA exemption allows you to reduce your taxable income by a portion of the HRA you receive from your employer, based on actual rent paid. It's available under Section 10(13A) — but only under the OLD tax regime.
Which cities are metro for HRA?
Delhi, Mumbai, Chennai, and Kolkata are classified as metro cities for HRA calculation (50% of basic). All other cities — including Bangalore, Hyderabad, Pune, and Gurgaon — are non-metro (40% of basic).
Can I claim HRA if I live with my parents?
Yes — you can pay rent to your parents and claim HRA exemption, provided you have a rent agreement, actual rent transfers (bank transfer is best), and your parents declare the rental income in their tax return. This is a legal and commonly used strategy.
What documents do I need to claim HRA?
Rent agreement, monthly rent receipts, and — if annual rent exceeds ₹1,00,000 — your landlord's PAN. Keep all documents for 6 years in case of IT assessment. Without these, your employer may not allow the exemption, and the IT Department can disallow it.
Is HRA exemption available under the new tax regime?
No. HRA exemption is only available under the old tax regime. If you've opted for the new regime (default from FY 2024-25), you cannot claim HRA exemption, regardless of how much rent you pay.
What if my rent is very low?
If rent paid is less than 10% of your basic salary, Rule 2 becomes negative, and the exemption drops to zero. This means you can't claim any HRA exemption if rent is below the 10% threshold. Higher rent always improves the exemption (up to Rule 3 limits).
Can I claim HRA on a home loan?
Only if you live in a rented accommodation. If you own the home you live in, you can't claim HRA (though you can claim home loan interest under Section 24(b)). If you own a home but rent it out and live elsewhere on rent, you can claim HRA on the new rent.
How is HRA exemption calculated if I change jobs mid-year?
You calculate HRA exemption separately for each employer, based on the rent paid during that employment period. Total annual exemption is the sum of exemptions from both employers. You may need to file ITR if total income exceeds the basic exemption limit.
Can I claim HRA on rent paid in cash?
Yes, but it's risky. The IT Department increasingly requires proof of payment (bank transfer). Cash payments are difficult to prove and can be disallowed during assessment. Always pay rent via bank transfer or cheque, especially for amounts above ₹20,000/month.
What if my landlord doesn't have a PAN?
If annual rent exceeds ₹1 lakh, you're required to collect and report your landlord's PAN. If the landlord doesn't have one, they must provide a declaration stating so. Some employers will refuse HRA exemption without this — plan accordingly.
Reviewed by AutoWealthLab Editorial Team
This calculator and its accompanying guide are maintained by the AutoWealthLab editorial team. Every formula is verified against standard financial references, and results are cross-checked with independent calculators before publishing. Our tools are updated whenever tax rules, interest rate benchmarks, or regulatory formulas change.
Last reviewed: October 2026 · Methodology: Standard amortization and compound interest models · Learn more about our testing process