What this calculates
Enter your monthly basic pay plus DA, the HRA you receive, the rent you pay and your city, and this works out how much of your house rent allowance is tax-free under the old regime — for the month and the year — which of the three limits decides it, and how much is taxed.
The formula
Limit 1
the HRA you actually receiveLimit 2
50% of salary in the eight cities, 40% elsewhereLimit 3
rent paid − 10% of salaryTax-free HRA
the least of limits 1, 2 and 3Salary is basic pay plus dearness allowance that counts for retirement benefits. The 50% cities from tax year 2026-27 are Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad, under the Income-tax Rules, 2026.
Worked example
In a city outside the eight, limit 2 drops to 40% × ₹50,000 = ₹20,000, so only ₹2,40,000 a year is tax-free and ₹60,000 is taxed. With ₹20,000 HRA and ₹18,000 rent, limit 3 — ₹18,000 − ₹5,000 = ₹13,000 — decides it: ₹1,56,000 a year tax-free.
When to use it, and the mistakes to avoid
Use it when declaring rent to your employer, filing your return, deciding between the old and new regimes, or negotiating rent and salary structure.
The mistakes that cost the most:
- Claiming HRA under the new regime. It is not allowed there.
- Using the old 40% for Bengaluru, Hyderabad, Pune or Ahmedabad. From 2026-27 they get 50%.
- Using gross salary. The limits use basic pay plus eligible DA only.
- Forgetting the 10% deduction from rent. Low rent can make the exemption zero.
- Claiming for your own house. HRA exemption needs rent actually paid.
FAQ
How is HRA exemption calculated?
It is the least of three amounts: the HRA you actually receive; 50% of your salary in the eight listed cities, or 40% elsewhere; and the rent you pay minus 10% of your salary. Salary here means basic pay plus dearness allowance that counts for retirement benefits.
Which cities get the 50% HRA limit?
From tax year 2026-27, under the Income-tax Rules, 2026: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Bengaluru, Hyderabad, Pune and Ahmedabad were added in 2026; before that they were at 40%. Every other city and town is at 40%.
Can I claim HRA under the new tax regime?
No. HRA exemption is available only under the old tax regime. Under the new regime, all of your HRA is taxed as part of your salary. Work out both regimes before choosing.
What if my rent is less than 10% of my salary?
Then none of your HRA is exempt, because the third limit - rent minus 10% of salary - is zero or less. With ₹50,000 salary, rent has to be more than ₹5,000 a month to give any exemption.
How much HRA is tax-free for ₹50,000 salary and ₹30,000 rent?
With ₹25,000 HRA in Bengaluru, all ₹25,000 a month - ₹3,00,000 a year - is tax-free: every limit is ₹25,000. In a non-metro city the 40% limit of ₹20,000 decides it, so ₹2,40,000 is tax-free and ₹60,000 taxable.
Can I claim HRA if I live in my own house?
No. The exemption is for rent you actually pay for the home you live in. If you own and live in your house, the whole HRA is taxable.