India finance

HRA Exemption Calculator

How much of your HRA is tax-exempt under the old regime: the minimum-of-three rule computed and each leg shown.

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Quick answer

Exempt HRA = the least of: actual HRA received, rent paid minus 10% of basic, and 50% of basic in the eight 50% cities (Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad from FY 2026-27) or 40% elsewhere. The exemption exists only in the old tax regime, under the new regime HRA is fully taxable.

Annual basic + DA

Annual HRA received

Annual rent paid

City

50% cities: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad (the last four from FY 2026-27).

Exempt HRA: ₹1,20,000
Taxable HRA: ₹1,20,000
Leg 1: actual HRA: ₹2,40,000
Leg 2: rent − 10% of basic: ₹1,20,000
Leg 3: 50% of basic: ₹3,00,000

The exemption is the least of the three legs, and it exists only under the old tax regime, HRA is fully taxable if you opt for the new regime. Enter the exempt amount in the income tax calculator to see which regime is better for you. Rent above ₹1 lakh/year requires the landlord’s PAN.

Did anything change during the year?

An appraisal, a rent revision, a move between cities, or months you paid no rent, any of these makes the annual shortcut above the wrong calculation. Rule 2A applies the least-of-three test to each month separately. This does that, starting from your figures above, and shows you what the shortcut got wrong.

Exempt for the year: ₹1,20,000
Taxable for the year: ₹1,20,000
HRA received over the year: ₹2,40,000
The annual-totals shortcut gives: ₹1,20,000; Same answer here, because nothing changed during the year.
Difference: ₹0; 0% of the correct exemption.

Month by month, with the leg that decided each one (12 rows)

Month	Exempt	HRA received	Rent − 10%	City %	Decided by
Apr	₹10,000	₹20,000	₹10,000	₹25,000	Rent − 10%
May	₹10,000	₹20,000	₹10,000	₹25,000	Rent − 10%
Jun	₹10,000	₹20,000	₹10,000	₹25,000	Rent − 10%
Jul	₹10,000	₹20,000	₹10,000	₹25,000	Rent − 10%
Aug	₹10,000	₹20,000	₹10,000	₹25,000	Rent − 10%
Sep	₹10,000	₹20,000	₹10,000	₹25,000	Rent − 10%
Oct	₹10,000	₹20,000	₹10,000	₹25,000	Rent − 10%
Nov	₹10,000	₹20,000	₹10,000	₹25,000	Rent − 10%
Dec	₹10,000	₹20,000	₹10,000	₹25,000	Rent − 10%
Jan	₹10,000	₹20,000	₹10,000	₹25,000	Rent − 10%
Feb	₹10,000	₹20,000	₹10,000	₹25,000	Rent − 10%
Mar	₹10,000	₹20,000	₹10,000	₹25,000	Rent − 10%

Each month is tested separately against all three legs and the smallest wins, that is what Rule 2A requires. Running the same test on annual totals gives a different answer whenever your salary, rent or city changed during the year, and it is the version most calculators and most employers' payroll portals produce.

Formulas last verified 2026-10-10. Results are estimates, not financial advice. How we calculate.

The three legs, worked

Annual basic + DA ₹6,00,000; HRA received ₹2,40,000; rent paid ₹1,80,000; living in a 50% city such as Bengaluru:

Leg	Computation	Amount
1, HRA received	as paid	₹2,40,000
2, rent − 10% of basic	1,80,000 − 60,000	₹1,20,000
3, 50% of basic (50% city)	50% × 6,00,000	₹3,00,000

The exemption is the minimum, ₹1,20,000, and the remaining ₹1,20,000 of HRA is taxed. At a 30% slab, the exemption is worth ₹36,000 a year in tax; the calculator above shows all three legs so you can see which one binds you.

Reading your own result

Leg 2 binds most people, rent is the usual constraint. Every extra rupee of rent above 10% of basic adds a rupee of exemption (until another leg binds), which is the honest arithmetic behind "rent receipts save tax".
Leg 1 binds low-HRA structures, if your employer pays little HRA, high rent cannot help beyond it. Salary restructuring (more HRA, less special allowance) is the fix, at your next negotiation.
Leg 3 rarely binds unless rent approaches half of basic, a sign you are either in expensive housing or have a small basic component.

Old regime vs new: the renter's question

The new regime trades away exemptions (HRA among them) for lower slab rates. Whether that trade wins depends mostly on how large your deductions are: a renter claiming a big HRA exemption plus 80C and home perks can still come out ahead in the old regime; someone with few deductions almost always prefers the new. Compute your exemption here, then enter it with your other deductions in the income tax calculator, which works out both regimes side by side and shows which one costs less. Rules and slabs change at budgets, so verify against the current year's official rates before filing. Related: gratuity, PPF (an 80C staple), and GST.

Frequently asked questions

How is the HRA exemption calculated?

The tax-exempt portion is the least of three amounts: (1) the HRA you actually received, (2) rent paid minus 10% of basic + DA, and (3) 50% of basic + DA in one of the eight 50% cities (Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad) or 40% elsewhere. Whatever HRA exceeds that minimum is taxed as salary.

Does HRA exemption exist in the new tax regime?

No. HRA exemption is available only under the old regime. Under the new regime the entire HRA is taxable, which is precisely why renters with large HRA components are among the people for whom the old regime can still win. Compute your exemption here, then enter it in the income tax calculator to compare both regimes on your full numbers.

Why is my exemption zero even though I get HRA?

Usually because rent is too low relative to basic: leg 2 is rent minus 10% of basic, and if your annual rent is under 10% of basic + DA, that leg is zero, making the minimum zero. Living rent-free (with parents, in company housing) also produces zero exemption.

Can I pay rent to my parents and claim HRA?

Yes, if it is genuine: an actual transfer of money, ideally by bank, a rent agreement, and the parent declaring the rent as income in their return. The arrangement is legal and commonly upheld; a paper-only arrangement discovered in scrutiny is treated as evasion. Genuine means genuine.

When do I need the landlord's PAN or a rent agreement?

Employers require the landlord's PAN once annual rent exceeds ₹1 lakh to grant the exemption through payroll. Keep rent receipts and the agreement regardless, if the employer under-grants, you can claim the correct exemption directly in your return, with the paper trail to defend it.

Do Bengaluru, Hyderabad, Pune and Ahmedabad get the 50% rate?

Yes, from FY 2026-27. Rule 279 of the Income-tax Rules, 2026 (in force from 1 April 2026) extends the 50% rate from the original four, Delhi, Mumbai, Kolkata and Chennai, to Bengaluru, Hyderabad, Pune and Ahmedabad as well. Every other city, including Gurugram and Noida, stays at 40%. For FY 2025-26 and earlier years, only the original four cities qualify, so pick "Anywhere else" when recalculating an older year for those four new cities.