HRA Exemption Calculator
House Rent Allowance · Section 10(13A) · FY 2026-27 · Old Regime Only
Results update instantly as you adjust your salary and rent
Where do you live?
Enter your monthly figures
How your exemption is calculated
HRA exemption = the minimum of these three conditions. The binding (lowest) value is highlighted.
Annual HRA summary
| Particulars | Monthly | Annual |
|---|---|---|
| Basic + DA | ₹50,000 | ₹6.00 L |
| HRA received | ₹20,000 | ₹2.40 L |
| Rent paid | ₹25,000 | ₹3.00 L |
| HRA exempt (Sec 10(13A)) | ₹20,000 | ₹2.40 L |
| HRA taxable | ₹0 | ₹0 |
| Tax saved (30% + cess) | ₹6,240 | ₹74,880 |
Condition 2 = Rs 25,000 minus 10% x Rs 50,000 = Rs 20,000
Condition 3 = 50% x Rs 50,000 = Rs 25,000
Exempt = MIN(Rs 20,000, Rs 20,000, Rs 25,000) = Rs 20,000/month
What is HRA Exemption? Section 10(13A) Explained
House Rent Allowance (HRA) is a component of your salary that your employer pays to help cover your rental expenses. Under Section 10(13A) of the Income Tax Act, a portion of the HRA you receive is exempt from income tax - provided you actually pay rent for residential accommodation and have opted for the old tax regime.
HRA exemption is one of the most valuable tax benefits available to salaried employees in India. A salaried person in the 30% tax bracket paying ₹25,000 per month in rent in a metro city can save up to ₹74,880 in income tax every year through HRA exemption alone - without making any additional investment.
The exemption is calculated using a three-condition formula - the exempt amount is the minimum of three figures. This ensures that the benefit is proportional to both the HRA received from your employer and the actual rent you pay, without enabling excess claims.
HRA Exemption Formula - Section 10(13A) Three-Condition Rule
The Income Tax Act specifies that HRA exemption is the lowest of the following three amounts, calculated on a monthly basis:
The HRA component your employer pays you each month. This is the absolute ceiling - you can never claim more than what you actually receive.
Your actual rent payment minus 10% of your basic salary (plus DA if applicable to retirement benefits). This condition ensures you have genuine skin in the game - the higher your salary, the more rent you need to pay before this condition yields exemption.
A salary-proportional cap based on your city. Only Mumbai, Delhi, Kolkata, and Chennai qualify as 'metro' under Income Tax rules. All other cities - including Bengaluru, Hyderabad, and Pune - are non-metro at 40%.
Metro vs Non-Metro Cities for HRA - Which Cities Get 50%?
The biggest point of confusion in HRA calculation is which cities count as "metro" under the Income Tax Act. The definition has not been updated since the law was written, so cities like Bengaluru, Hyderabad, and Pune - despite being among India's largest metros by population and rent levels - are classified as non-metro for HRA purposes and attract only 40% of basic salary under Condition 3.
Important: Bengaluru, Hyderabad, Ahmedabad, and Pune are NOT metro cities for Income Tax HRA purposes, despite being major urban centres. If you work there, Condition 3 uses 40% of basic.
Impact: For a ₹1 lakh basic salary, the metro ceiling is ₹50,000/month vs ₹40,000/month for non-metro - a ₹1.2 lakh annual difference in potential exemption.
| Basic salary | Condition 3 (metro, 50%) | Condition 3 (non-metro, 40%) | Difference/month | Difference/year |
|---|---|---|---|---|
| ₹30,000 | ₹15,000 | ₹12,000 | ₹3,000 | ₹36,000 |
| ₹50,000 | ₹25,000 | ₹20,000 | ₹5,000 | ₹60,000 |
| ₹75,000 | ₹37,500 | ₹30,000 | ₹7,500 | ₹90,000 |
| ₹1,00,000 | ₹50,000 | ₹40,000 | ₹10,000 | ₹1,20,000 |
| ₹1,50,000 | ₹75,000 | ₹60,000 | ₹15,000 | ₹1,80,000 |
| ₹2,00,000 | ₹1,00,000 | ₹80,000 | ₹20,000 | ₹2,40,000 |
How to Optimise Rent for Maximum HRA Exemption
Paying more rent does not always increase your HRA exemption, because Condition 1 (actual HRA received) and Condition 3 (percentage of basic) create hard upper ceilings. The chart below shows how exemption changes with rent for a typical salary profile.
The break-even rent where Condition 2 stops being the binding constraint is: Actual HRA received + 10% of basic salary. Paying above this amount yields no additional exemption if Conditions 1 or 3 are already lower.
| Monthly rent | Cond 1 (HRA) | Cond 2 (rent−10%) | Cond 3 (50% basic) | Exemption | Taxable HRA | Binding |
|---|---|---|---|---|---|---|
| ₹10,000 | ₹25,000 | ₹4,000 | ₹30,000 | ₹4,000 | ₹21,000 | Cond 2 |
| ₹15,000 | ₹25,000 | ₹9,000 | ₹30,000 | ₹9,000 | ₹16,000 | Cond 2 |
| ₹20,000 | ₹25,000 | ₹14,000 | ₹30,000 | ₹14,000 | ₹11,000 | Cond 2 |
| ₹25,000 | ₹25,000 | ₹19,000 | ₹30,000 | ₹19,000 | ₹6,000 | Cond 2 |
| ₹30,000 | ₹25,000 | ₹24,000 | ₹30,000 | ₹24,000 | ₹1,000 | Cond 2 |
| ₹35,000 | ₹25,000 | ₹29,000 | ₹30,000 | ₹25,000 | Nil | Cond 1 |
| ₹40,000 | ₹25,000 | ₹34,000 | ₹30,000 | ₹25,000 | Nil | Cond 1 |
| ₹45,000 | ₹25,000 | ₹39,000 | ₹30,000 | ₹25,000 | Nil | Cond 1 |
Assumes: Basic ₹60,000/month · HRA received ₹25,000/month · Metro city · Cond 3 = ₹30,000 (50% of basic)
Once monthly rent reaches ₹31,000 (₹25,000 HRA + 10% × ₹60,000 basic = ₹31,000), Condition 2 is no longer the binding constraint - Conditions 1 and 3 cap the exemption. Paying ₹40,000 rent versus ₹31,000 rent gives the same exemption (₹25,000/month) but costs you ₹9,000 more per month with zero tax benefit.
Paying Rent to Parents for HRA - Rules, Benefits, and Compliance
Paying rent to parents and claiming HRA exemption is a completely legitimate and widely-used tax-saving strategy in India. The Income Tax Act does not prohibit family rental arrangements - but the transaction must be genuine and well-documented. The IT department scrutinises these claims carefully, especially at higher rent amounts.
The family tax benefit is significant: your HRA exemption saves tax at your slab rate (20% or 30%), while your parent declares the rental income at their own rate - often zero (if below ₹3 lakh) or 5% - resulting in net family tax savings.
A written rent agreement on stamp paper signed by both parties. Include monthly rent amount, property address, duration, and signatures. A notarised agreement adds credibility.
Pay rent exclusively via NEFT, IMPS, UPI, or cheque. Cash payments are not accepted as valid proof. Maintain a clean 12-month bank statement showing consistent rent transfers.
Collect signed rent receipts each month from your parent (the landlord). Include rent amount, property address, period, landlord's name and signature. Parent's PAN is mandatory if total annual rent exceeds ₹1 lakh.
Your parent must declare this rental income in their Income Tax Return under 'Income from House Property'. Failure to declare makes the transaction suspect. The family saves tax overall if the parent is in a lower tax bracket.
Your parent must be the legal owner of the property you are renting. You cannot pay rent to a parent for a property owned by someone else. Ownership can be verified from property tax records or sale deed.
The Income Tax Act specifically disallows HRA exemption for rent paid to a spouse. You cannot claim HRA for a house owned by your husband or wife even if you pay rent. Parents, siblings, and other relatives are acceptable landlords.
You pay ₹20,000/month rent to your parent. You are in the 30% tax bracket - HRA exemption saves you ₹20,000 × 12 × 30% × 1.04 = ₹74,880/year. Your parent receives ₹2,40,000 rental income. If their only income is this rent, the net taxable amount after ₹2,00,000 standard deduction (30% of rent) and basic exemption limit is often nil or minimal - making the total family saving close to the full ₹74,880.
Documents Required to Claim HRA Exemption
HRA exemption requires two stages of documentation: first, a declaration to your employer at the start of the financial year for lower TDS; and second, submission of actual proof before the year-end deadline (typically January–February). Missing the employer deadline does not mean you lose the claim - you can still file it in your ITR and receive a refund.
| Document | When required | Key details |
|---|---|---|
| Rent receipts | Always - every month | Signed by landlord, include amount, address, period. Revenue stamp for receipts above ₹5,000. |
| Rent agreement | Always recommended | Stamp-paper agreement with rent amount, address, duration, and both parties' signatures. |
| Landlord's PAN | Annual rent above ₹1 lakh | Mandatory per Rule 26C. Collect in Form 60 if landlord doesn't have PAN. |
| Form 12BB | Start of each financial year | HRA declaration submitted to employer's payroll team for computing lower TDS. |
| Bank transfer statements | If queried by IT department | 12 months of consistent rent payment records via NEFT/IMPS/UPI/cheque. |
| Landlord's address proof | If queried by IT department | Property tax receipt, electricity bill, or sale deed showing landlord's ownership. |
| Ownership proof (parents) | If paying rent to parents | Property tax receipt or sale deed confirming parent's ownership of the rented property. |
No HRA in Salary? Claim Section 80GG Instead
If your salary structure does not include an HRA component - common for self-employed individuals, freelancers, and some employees - you cannot claim exemption under Section 10(13A). However, you may be eligible for a deduction under Section 80GG if you pay rent.
- ✓You do NOT receive HRA from your employer
- ✓Neither you, your spouse, nor minor child owns a residential property
- ✓You pay rent for accommodation
- ✓Available under old tax regime only
- ✓Must file ITR to claim - employer cannot adjust TDS
Deduction is the minimum of:
80GG maximum is ₹60,000/year vs HRA which can be several lakhs - ask HR to add HRA to your salary structure if possible.