HRA exemption: least of three numbers
Exempt = min (actual HRA, rent − 10% salary, 50% salary in 8 metros else 40% — FY 2026-27+). Salary = basic + DA, monthly.
Monthly exempt HRA
₹16,000
Yearly exempt ≈ ₹1,92,000 · Taxable HRA ≈ ₹9,000/mo
Old regime only — new regime effectively skips HRA. Annual rent above ₹1 lakh needs landlord PAN (+ relationship disclosure in Form 124 from FY 2026-27). No HRA at all? Check 80GG (Form 10BA) in the FAQ.
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Ask SahayakWorked example: Pune employee, old regime
- Basic + DA ₹50,000/month (₹6,00,000/yr), HRA received ₹30,000/month (₹3,60,000), rent paid ₹32,000/month (₹3,84,000).
- Three limits: actual HRA ₹3,60,000; rent − 10% of salary = ₹3,84,000 − ₹60,000 = ₹3,24,000; 50% of salary (Pune counts as a 50% city from April 2026) = ₹3,00,000.
- Exemption = least of the three = ₹3,00,000. Under the older 40% rule it was ₹2,40,000 — ₹60,000 more is now exempt.
How the HRA exemption calculator works: the rules
- HRA exemption = least of (a) actual HRA received, (b) rent paid minus 10% of salary, (c) 50% of salary in listed cities or 40% elsewhere. Salary means basic + DA (and commission linked to turnover).
- From 1 April 2026 (Rule 279, Income-tax Rules 2026), the 50% list covers Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad.
- HRA exemption is available only under the old regime. If annual rent exceeds ₹1 lakh, give your employer the landlord's PAN.
How to get the most HRA exemption
HRA exemption is the lowest of three numbers, so the trick is to see which one is limiting you. If 'rent minus 10% of salary' is the smallest, a higher rent (backed by real payments) raises your exemption. If 'actual HRA received' is the smallest, your salary structure caps it, and only a change in your CTC can help.
Salary for HRA means basic plus dearness allowance (if it counts for retirement benefits) plus any commission fixed as a percentage of turnover. Bonuses and special allowances don't count, so a low basic pay reduces your HRA exemption even if your CTC is high.
Paying rent to parents
You can claim HRA for rent paid to your parents if they actually own the house and you pay them by bank transfer. Your parents must show the rent as income in their own return. Rent paid to a spouse is usually not accepted, because tax officers treat it as an arrangement within the household.
When you don't get HRA from your employer
Self-employed people, and salaried people whose salary has no HRA component, can claim a deduction for rent under Section 80GG of the old regime instead. It's limited to the lowest of ₹5,000 a month, 25% of total income, or rent paid minus 10% of total income, and you file Form 10BA. Like HRA, 80GG is not available in the new regime.
Proof to keep
Keep a rent agreement, monthly rent receipts (with a revenue stamp if paid in cash above ₹5,000), and bank statements showing the transfers. If yearly rent is above ₹1 lakh, give the landlord's PAN to your employer — without it, the HRA exemption can be refused.
HRA in the new tax regime
The new regime, which is the default from FY 2023-24, does not allow the HRA exemption at all. If you choose it, your full HRA is taxable. So the HRA you can save is one of the biggest reasons some salaried people stay in the old regime. Work out your HRA exemption here first, then compare both regimes with the tax calculator before telling your employer which regime you want for TDS.
Living in your own house or in a different city
If you live in a house you own, you can't claim HRA for it. But if your own house is in another city and you rent where you work, you can claim HRA on the rent and also claim the home-loan interest deduction on your own house under the old regime. If you change cities mid-year, work out HRA month by month, using the 50% or 40% limit for each city.
Common reasons HRA claims are rejected
Rent paid in cash with no receipts, rent agreements made only at tax-filing time, landlord PAN missing when rent is above ₹1 lakh a year, and rent paid to a spouse are the usual reasons employers or tax officers disallow HRA. If your employer didn't give the exemption in Form 16, you can still claim it in your income tax return, as long as you keep the proof.
HRA exemption limit by city (from FY 2026-27)
| City | Limit (% of basic + DA) |
|---|---|
| Mumbai | 50% |
| Delhi | 50% |
| Kolkata | 50% |
| Chennai | 50% |
| Bengaluru | 50% |
| Hyderabad | 50% |
| Pune | 50% |
| Ahmedabad | 50% |
| All other cities and towns | 40% |
Rule 279, Income-tax Rules 2026. Until FY 2025-26, only Mumbai, Delhi, Kolkata and Chennai got 50%.
HRA exemption calculator: frequently asked questions
How is HRA exemption calculated?
It is the lowest of three amounts: actual HRA, rent paid minus 10% of basic + DA, and 50% (listed cities) or 40% (other cities) of basic + DA.
Which cities get 50% HRA exemption now?
From April 2026: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. All other cities use 40%.
Can I claim HRA in the new tax regime?
No. HRA exemption is only available if you choose the old regime.
Is landlord PAN mandatory for HRA?
Yes, if your total rent for the year is more than ₹1 lakh.
Can I claim HRA if I pay rent to my parents?
Yes, if you actually pay rent with proof (bank transfers, agreement) and your parent declares it as income.
What if my employer did not consider my HRA?
You can claim the exemption while filing your return, if you have rent receipts and proof of payment.
Official sources: Income Tax Department· Last reviewed 2026-10-30. Results are estimates — confirm final figures with your lender, insurer or tax adviser.