HRA exemption calculation: formula, example and the 50% metro cities for 2026-27
House Rent Allowance (HRA) is partly tax-free if you pay rent and file under the old tax regime. Under the new regime (Section 115BAC) HRA is fully taxable, so none of this applies there.
The three-limit formula
Your exempt HRA is the lowest of these three amounts:
- The HRA you actually receive from your employer.
- Rent paid minus 10% of basic salary plus dearness allowance (DA).
- 50% of basic plus DA if you live in a metro city, otherwise 40%.
Whatever is left of your HRA after the exemption is added to your taxable salary.
Which cities count as metro?
Until FY 2025-26 only Delhi, Mumbai, Kolkata and Chennai got the 50% limit. From tax year 2026-27 (1 April 2026) the rules under the Income-tax Rules, 2026 move Bengaluru, Hyderabad, Pune and Ahmedabad into the 50% group too, making eight cities. All other cities stay at 40%. Check the current rule text before you file, because this is a recent change.
Skip the maths, try your own numbersHRA Exemption Calculator (India)Free, instant, no sign-up →Worked example
Monthly basic plus DA ₹50,000, HRA received ₹30,000, rent paid ₹30,000, living in Bengaluru.
| Limit | Amount per month |
|---|---|
| HRA received | ₹30,000 |
| Rent − 10% of basic (30,000 − 5,000) | ₹25,000 |
| 40% of basic (old rule) | ₹20,000 |
| 50% of basic (2026-27 rule) | ₹25,000 |
Under the old 40% rule the exemption is ₹20,000 a month. Under the 50% rule it is ₹25,000 a month, which is ₹60,000 more exempt income a year. Taxable HRA falls from ₹10,000 to ₹5,000 a month.
Things people miss
- If yearly rent is above ₹1 lakh, you need your landlord’s PAN.
- You can only claim for months you actually paid rent.
- Rent paid to a parent is allowed if it is a genuine arrangement and the parent declares it as income.
Enter your own salary and rent in the calculator below to see all three limits side by side.
What counts as "basic salary" for HRA
The HRA formula uses basic salary plus dearness allowance (DA) only if DA forms part of retirement benefits. Special allowances, bonuses and other pay components are not part of the base. If you are unsure, check your payslip and ask your payroll team, because a wrong base changes all three limits.
Step-by-step HRA calculation
- Add up your actual HRA received for the months you are claiming.
- Add up rent paid for those months, then subtract 10% of basic plus DA for the same months.
- Calculate 50% (metro) or 40% (non-metro) of basic plus DA for those months.
- The lowest of the three numbers is your tax-free HRA. The rest is taxable salary.
Example 2: a non-metro city
Monthly basic ₹40,000, HRA received ₹16,000, rent paid ₹14,000, living in a city outside the metro list.
| Limit | Per month |
|---|---|
| HRA received | ₹16,000 |
| Rent − 10% of basic (14,000 − 4,000) | ₹10,000 |
| 40% of basic | ₹16,000 |
| Exempt HRA (lowest) | ₹10,000 |
Exempt HRA is ₹1,20,000 for the year, and the remaining ₹72,000 of HRA is taxed.
Which regime lets you claim HRA?
HRA exemption is available only under the old tax regime. The new regime under section 115BAC does not allow it. If you pay high rent, run both regimes in the calculator, because the lower rates of the new regime can still beat the old regime plus HRA for some salaries.
Documents you need
- Rent receipts or a rent agreement as proof of payment.
- Landlord's PAN if yearly rent exceeds ₹1 lakh.
- Bank statements or UPI records showing the rent transfers, which help if your employer or the tax department asks questions.
Paying rent to parents
You can claim HRA for rent paid to your parents if it is a genuine arrangement. They must own the house, you must actually pay rent by a traceable method, and your parents must declare the rent as income in their return. A sham arrangement will not survive scrutiny.
No HRA from the employer? Use section 80GG
If you pay rent but your salary does not include HRA, section 80GG may allow a deduction under the old regime, subject to conditions and limits. You must not own residential property in the city where you live, and you must file the required declaration.
Common mistakes
- Using total CTC instead of basic plus DA.
- Claiming rent for months you did not pay it.
- Forgetting that the metro list changed from tax year 2026-27, with Bengaluru, Hyderabad, Pune and Ahmedabad joining Delhi, Mumbai, Kolkata and Chennai at 50%.
- Not telling your employer about HRA at the start of the year, which results in extra TDS you reclaim only on filing.
Troubleshooting: common problems and fixes
- My employer calculated a lower exemption. They may use the lower of the three limits for the months you submitted rent. Check your declared rent and the basic salary base.
- The landlord has no PAN. For yearly rent above ₹1 lakh, a PAN or declaration is needed. Talk to your employer about what proof they accept.
- I changed cities during the year. Calculate separately for the months in each city, because metro and non-metro limits differ.
- I paid rent for only some months. Claim only for the months you paid rent. The calculator lets you enter the months.
- I switched regime. HRA exemption is not available in the new regime, so check which regime you will file under.
How accurate is this?
The formula follows section 10(13A) and the rules on the income tax portal, including the metro list for 2026-27. Your actual exemption depends on your payslip components, rent proof and regime choice. Treat the result as an estimate and confirm with your employer or a tax professional. The calculator does not store any data.
More free Zyphub tools you may need
- HRA Exemption Calculator (India): How much of your House Rent Allowance is tax-free (old regime).
- Income Tax & Take-Home Pay Calculator: Take-home pay after income tax in the US, UK, Canada, Australia, India, New Zealand and Singapore.
- Compound Interest Calculator: See how savings grow over time.
Frequently asked questions
How is HRA exemption calculated?
It is the lowest of three amounts: the HRA you receive, rent paid minus 10% of basic plus DA, and 50% (metro) or 40% (other cities) of basic plus DA.
Which cities count as metro for HRA?
From tax year 2026-27, Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad get the 50% limit. Other cities get 40%.
Can I claim HRA in the new tax regime?
No. HRA exemption is available only under the old tax regime.
Do I need a landlord PAN?
Yes, if the rent you pay in a year exceeds ₹1 lakh.
Can I claim HRA for rent paid to my parents?
Yes, if the arrangement is genuine, you pay rent by a traceable method and your parents report the rent as their income.
Can I claim HRA if I live with my parents?
Only if you actually pay rent to them as part of a genuine arrangement and they declare the rent as income.
Is HRA taxable?
The part that exceeds the exemption is taxable, and under the new regime the whole HRA is taxable.