How HRA exemption is calculated
Under section 10(13A) and rule 2A, the exempt HRA is the lowest of:
- Actual HRA received from your employer
- Rent paid minus 10% of salary (basic + DA)
- 50% of salary if you live in Delhi, Mumbai, Kolkata or Chennai; 40% elsewhere
Whatever is left of your HRA after the exemption is taxable.
Example
Basic ₹40,000/month, HRA ₹16,000, rent ₹15,000 in Hyderabad (non-metro). (1) ₹16,000; (2) 15,000 − 4,000 = ₹11,000; (3) 40% of 40,000 = ₹16,000. Exempt HRA = ₹11,000/month (₹1,32,000 a year); taxable HRA = ₹5,000/month.
HRA exemption is available only in the old tax regime. If you choose the new regime, the full HRA is taxable. Use the income tax calculator to see which regime is cheaper for you.
Documents you need
- Rent receipts (monthly or quarterly) — generate them with our rent receipt generator.
- Landlord's PAN if annual rent exceeds ₹1,00,000.
- Rent agreement for larger claims; some employers ask for it above ₹8,333/month.
- Paying rent to parents is allowed if they actually own the house and declare the rent as income.
Bengaluru, Hyderabad, Pune and Ahmedabad are treated as non-metro (40%) for HRA, even though they are large cities.