How the HRA calculator works
Enter your basic salary (plus dearness allowance, if it forms part of retirement benefits), the HRA you actually receive, the rent you pay and whether you live in a metro city. The calculator computes three amounts and picks the lowest as your exemption. The rest of the HRA is added to your taxable salary.
Use annual figures for a full year, or monthly figures if all four inputs are for the same month. If your salary, rent or city changed during the year, compute each period separately and add the exemptions — the rule is applied period by period, not on annual totals.
For FY 2026-27, eight cities are treated as metros for the 50% limit: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Every other location uses 40%.
HRA exemption formula with variable key
Formula
Exempt HRA = minimum of (A, B, C)
- Where:
- A
- = actual HRA received from the employer
- B
- = rent paid − 10% of basic salary (basic + DA)
- C
- = 50% of basic salary in a metro city; 40% elsewhere
Taxable HRA = HRA received − exempt HRA. If you pay no rent, or rent is less than 10% of basic, B is zero or negative and the whole HRA is taxable.
Worked example in rupees
Ravi works in Delhi with a basic salary of ₹50,000 per month, receives HRA of ₹20,000 per month and pays rent of ₹25,000 per month. Annual figures:
- A = actual HRA = ₹20,000 × 12 = ₹2,40,000
- B = rent − 10% of basic = ₹3,00,000 − ₹60,000 = ₹2,40,000
- C = 50% of basic (metro) = 50% × ₹6,00,000 = ₹3,00,000
- Exempt HRA = minimum (₹2,40,000, ₹2,40,000, ₹3,00,000) = ₹2,40,000
- Taxable HRA = ₹2,40,000 − ₹2,40,000 = nil
Now suppose Priya, also in Delhi, has basic ₹40,000, HRA ₹16,000 and rent ₹15,000 per month. A = ₹1,92,000; B = ₹1,80,000 − ₹48,000 = ₹1,32,000; C = ₹2,40,000. Her exemption is ₹1,32,000 and ₹60,000 of HRA becomes taxable. At a 20% marginal rate that is roughly ₹12,000 of extra tax plus cess.
Comparison: metro vs non-metro on the same salary
| Test | Metro (50%) | Non-metro (40%) |
|---|---|---|
| A: actual HRA | ₹2,40,000 | ₹2,40,000 |
| B: rent − 10% basic | ₹2,40,000 | ₹2,40,000 |
| C: % of basic | ₹3,00,000 | ₹2,40,000 |
| Exempt HRA | ₹2,40,000 | ₹2,40,000 |
In this case the city makes no difference because tests A and B bind first. The metro limit matters when your HRA and rent are both high relative to basic — for example, HRA equal to 50% of basic with rent above 60% of basic.
Common mistakes and tax implications
- Claiming HRA under the new regime: the new regime (the default) does not allow the HRA exemption. If HRA is your main deduction, compare both regimes in the Income Tax Calculator before opting for the old one.
- Using gross salary instead of basic: only basic pay plus dearness allowance counts for the 10% and 50%/40% tests. Special allowances and bonuses are excluded.
- Forgetting the landlord's PAN: above a rent threshold the employer needs your landlord's PAN to allow the exemption — check the current limit with your payroll team.
- Paying rent to a parent without records: rent to parents is allowed, but the money must actually be paid (bank transfer), a rent agreement should exist and the parent must declare the rental income.
- Claiming HRA and a home-loan deduction on the same city home without justification: both can be claimed in genuine cases (for example, the owned house is far from the workplace) but the facts must support it.
- No HRA component in salary: you cannot use this exemption, but Section 80GG may allow a smaller deduction under the old regime — check the current limits.
Frequently asked questions
Is HRA exemption available in the new tax regime?
No. The HRA exemption under Section 10(13A) is available only if you opt for the old tax regime. Under the new (default) regime the entire HRA is taxable.
Which cities count as metro for HRA in FY 2026-27?
Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad are treated as metros, so 50% of basic salary applies. All other cities and towns use 40%.
Does DA count in basic salary for HRA?
Dearness allowance counts only if it forms part of retirement benefits under your employment terms. Commission based on a fixed percentage of turnover also counts; other allowances do not.
Can I claim HRA if I pay rent to my parents?
Yes, provided the arrangement is genuine: pay by bank transfer, keep a rent agreement and receipts, and your parent should report the rent as income in their return.
Can I claim HRA and home-loan interest together?
Yes, if the facts justify it — for example, you own a house in another city or your owned house is let out and you live on rent near work. Both belong to the old regime.
What if I did not submit rent receipts to my employer?
You can still claim the exemption when filing your return, but keep the rent agreement, receipts and bank statements in case the assessing officer asks for proof.
Is HRA calculated monthly or annually?
The rule is applied for each period during which salary, HRA, rent and city remain the same. If nothing changes, annual figures give the same answer as twelve monthly calculations.
What if my rent is less than 10% of basic?
Then test B is zero or negative, the exemption is nil and the whole HRA is taxable.
I live in Noida or Gurugram — is that metro?
No. Only the eight named cities are metros for HRA. Noida, Gurugram, Ghaziabad and Faridabad use the 40% limit even though they are in Delhi NCR.
Can I claim HRA if I own a house in the same city?
Generally you cannot claim HRA for rent paid on a house you own. If you own one house and rent another in the same city for a genuine reason, keep evidence to support the claim.
Is this tax advice?
No. Two Plus Two Nine is an AMFI-registered Mutual Fund Distributor. This calculator is illustrative; consult a qualified tax professional for your specific case.