What is HRA?
House rent allowance (HRA) is a part of salary that employers pay to help cover the cost of renting a home. If you live in rented accommodation and choose the old tax regime, part or all of your HRA can be exempt from tax. The exempt amount depends on your salary, the rent you pay and the city you live in.
HRA exemption formula
The exemption is the lowest of these three amounts:
- The actual HRA received from your employer.
- Rent paid minus 10% of salary (basic + DA).
- 50% of salary in a metro city, or 40% of salary in any other city.
The rest of your HRA is added to your taxable salary.
New metro cities from tax year 2026-27
Under the Income-tax Rules that came with the new Income-tax Act, the 50% limit now covers eight cities: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad. Earlier, only Mumbai, Delhi, Kolkata and Chennai qualified. Employees in Bengaluru, Hyderabad, Pune and Ahmedabad can now get a larger exemption when the third limit is the lowest.
Worked example: metro city
Basic salary ₹50,000 a month, HRA ₹20,000 a month, rent ₹20,000 a month, living in Bengaluru. Yearly:
- Actual HRA: ₹2,40,000
- Rent minus 10% of basic: ₹2,40,000 − ₹60,000 = ₹1,80,000
- 50% of basic: ₹3,00,000
The exemption is ₹1,80,000 and the remaining ₹60,000 of HRA is taxable.
Worked example: non-metro city
Basic ₹50,000, HRA ₹25,000 and rent ₹30,000 a month, living in Jaipur. Yearly:
- Actual HRA: ₹3,00,000
- Rent minus 10% of basic: ₹3,60,000 − ₹60,000 = ₹3,00,000
- 40% of basic: ₹2,40,000
The exemption is ₹2,40,000; ₹60,000 of HRA is taxable.
How to get the most from HRA
- Submit rent proof on time. Give your employer rent receipts (and the landlord's PAN if rent is over ₹1 lakh a year) so less tax is deducted each month.
- Check which limit applies. If "rent minus 10%" is the lowest, paying more rent increases the exemption; if "40%/50% of basic" is lowest, it does not.
- Missed your employer's deadline? You can still claim the exemption when you file your return.
- Compare regimes. Put your HRA exemption into the income tax calculator to see whether the old regime is actually better for you, and the salary calculator to see your take-home pay.
Frequently asked questions
How is HRA exemption calculated?
The exempt part of HRA is the lowest of three amounts: the actual HRA you receive, the rent you pay minus 10% of your salary, and 50% of salary if you live in a metro city (40% elsewhere). Salary here means basic pay plus dearness allowance.
Which cities count as metro for HRA in tax year 2026-27?
From tax year 2026-27 the 50% limit applies to eight cities: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad. All other cities use 40%.
Can I claim HRA in the new tax regime?
No. HRA exemption is available only if you choose the old tax regime.
Do I need my landlord’s PAN?
Yes, if the rent you pay is more than ₹1 lakh in a year, you must give your employer the landlord’s PAN. Keep rent receipts and the rental agreement as proof.
Can I claim HRA if I pay rent to my parents?
Yes, if you genuinely pay rent to a parent who owns the house, you can claim HRA. Your parent must show that rent as income in their own tax return. You cannot claim HRA for rent paid to your spouse.
What if I do not receive HRA from my employer?
Salaried people without HRA, and the self-employed, may be able to claim a smaller deduction for rent paid under a separate provision (formerly Section 80GG) in the old regime, subject to conditions and limits.
Sources
Last updated 19 September 2026. Results are estimates for planning only and are not investment, tax or legal advice. See our disclaimer.