HRA exemption calculator

House Rent Allowance exemption, under Section 10(13A), is the least of three separate amounts — not a simple percentage of your salary, and not the full rent you pay. Most people assume it's one or the other; it's actually whichever of the three numbers turns out smallest, and which one that is changes depending on your specific salary and rent.

The three amounts, and why the smallest one wins

The first is simple: the actual HRA your employer pays you. You can never be exempted for more than you actually received, however high your rent is. The second is your rent paid minus 10% of your basic salary — the idea being that a small share of your salary is assumed to go toward housing regardless, so only rent above that baseline counts. The third is a flat percentage of your basic salary: 50% if you live in a metro, 40% if you don't. Whichever of these three is lowest is your actual exemption — the other two are irrelevant once you know which one binds.

The metro list is shorter than most people think

Only four cities count as metros for this calculation: Delhi, Mumbai, Kolkata, and Chennai. Bengaluru, Hyderabad, Pune, Gurgaon, and Noida are all non-metros under this rule, no matter how high the rent actually is there. Someone paying ₹40,000 a month in Bengaluru gets the same 40% ceiling as someone paying ₹15,000 in a much smaller city — the law hasn't been updated to reflect how rent has actually shifted across Indian cities, and isn't likely to be anytime soon. If you work in one of the non-metro tech hubs, don't assume you get the metro rate just because your rent feels metro-sized.

Why this only matters under the old regime

HRA exemption is one of the deductions the new tax regime removed entirely. If you've chosen the new regime — the default since FY 2023-24 — this calculation doesn't apply to you at all, regardless of your rent. It's worth running the numbers on this calculator alongside the old vs new regime comparison tool: a large HRA exemption is exactly the kind of deduction that can tip the old regime back into being the better choice, even against the new regime's lower rates.

What you'll need to actually claim it

This number is what you're entitled to, not what happens automatically. Your employer typically needs rent receipts, and a copy of your rental agreement if annual rent crosses ₹1,00,000, to factor this into your monthly tax deduction. If you're claiming rent paid to a parent, that arrangement needs to be genuine — a real agreement, real payments, and your parent declaring the rent as their own income — since this is one of the more commonly scrutinized deductions on a tax return.

A quick example

Someone earning ₹50,000 a month in basic salary, receiving ₹25,000 in HRA, and paying ₹20,000 rent in Chennai (a metro) would compare: actual HRA received, ₹3,00,000 a year; rent minus 10% of basic, (₹2,40,000 − ₹60,000) = ₹1,80,000 a year; and 50% of basic, ₹3,00,000 a year. The lowest of the three is ₹1,80,000 — rent minus 10% of basic is the binding constraint here, not the HRA actually received, which is a common surprise for people expecting their full HRA to be exempt.

When this exemption is worth almost nothing

If you pay little or no rent — living with family without a formal arrangement, for instance, or in employer-provided housing — the rent-minus-10%-of-basic figure can come out at zero or close to it, making that the binding constraint regardless of how generous your employer's HRA component is. In that case, the "HRA" your employer pays is really just taxable salary dressed up as an allowance, and this calculator will show you exactly that rather than a misleadingly generous number.