HRA Exemption Calculator

How to use this calculator

1. Enter your annual basic salary, and dearness allowance if it forms part of retirement benefits.
2. Enter the HRA received and the rent paid, both annual.
3. Choose whether you live in a metro.

The output names the rule that is limiting your exemption, which tells you whether anything can actually be changed.

How the calculation works

The exemption is the least of three amounts:

1. Actual HRA received
2. Rent paid − 10% of (basic + DA)
3. 50% of (basic + DA) in a metro, 40% elsewhere

Because it is the least of three, improving only one of them often changes nothing. That is why the calculator names the binding rule.

A worked example

Basic ₹6,00,000, HRA received ₹3,00,000, rent paid ₹2,40,000, living in Mumbai.

Rule 1: actual HRA received            = ₹3,00,000
Rule 2: 2,40,000 − 10% of 6,00,000     = ₹1,80,000
Rule 3: 50% of 6,00,000 (metro)        = ₹3,00,000

HRA exemption	₹1,80,000
Taxable HRA	₹1,20,000
Limited by	Rent paid − 10% of salary

Rule 2 binds. Note what this means: raising your HRA component would achieve nothing, and neither would moving to a more expensive city. Only paying more rent increases the exemption here — up to the ₹3,00,000 ceiling set by the other two rules.

At a 30% slab, that ₹1,80,000 exemption is worth about ₹54,000 in tax.

Which cities are metros?

Only four: Delhi, Mumbai, Kolkata and Chennai.

Bengaluru, Hyderabad, Pune, Ahmedabad, Gurugram and Noida are all non-metro for HRA purposes and get 40%, not 50% — however expensive their rents have become. The list comes from the Income Tax Act and has not been revised to reflect how Indian cities have grown.

For someone on ₹6,00,000 basic, that distinction is worth ₹60,000 of potential exemption, or roughly ₹18,000 of tax at the 30% slab.

The new regime removes this entirely

HRA exemption is not available under the new tax regime. It is one of the deductions surrendered in exchange for lower slab rates.

If your HRA exemption is large, that is a serious argument for the old regime. An exemption of ₹1,80,000 plus a full ₹1,50,000 under 80C plus ₹2,00,000 of home loan interest starts to make the old regime competitive. Run both through the income tax calculator before deciding — the answer depends on your numbers, not on a rule of thumb.

Documentation you actually need

Rent receipts for the full year, with the landlord’s signature. Employers usually require these before allowing the exemption in Form 16.

Landlord’s PAN, if annual rent exceeds ₹1,00,000. Without it your employer cannot allow the claim. If the landlord genuinely has no PAN, a signed declaration is required instead.

Bank transfers rather than cash. A paper trail is what survives an assessment. Cash rent with handwritten receipts and no corresponding bank withdrawals is the most commonly disallowed HRA claim there is.

A rent agreement, ideally. Not strictly mandatory but the first thing asked for when a claim is questioned.

Common mistakes to avoid

Using gross salary instead of basic. The formula uses basic plus DA only, not your total package. Using gross inflates rules 2 and 3 and produces an exemption you cannot support.

Including DA that does not qualify. Only dearness allowance that forms part of retirement benefits counts. Most private sector employees have no qualifying DA at all — enter zero rather than guessing.

Assuming your city is a metro. See above. This is the most frequent error and it always goes the same way.

Forgetting rule 2 can be negative. If your rent is below 10% of salary, the exemption is zero regardless of how much HRA you receive. Someone on ₹6,00,000 basic paying ₹4,000 a month gets nothing.

Claiming rent paid to a spouse. Routinely challenged and usually disallowed. Rent to a parent or sibling can be legitimate, but only with a real tenancy, actual bank transfers, and the recipient declaring the rental income in their own return.

Can you claim HRA and a home loan together?

Yes, and it is entirely legitimate in common situations — living in a rented flat in the city you work in while repaying a loan on a property elsewhere, or one that is let out. The two claims are assessed independently.

What is not permitted is claiming rent on a property you own and occupy. If your workplace and your owned property are in the same city and you claim both, expect to be asked to explain why.

When this calculator is not the right tool

For the tax impact of the exemption, feed the taxable HRA figure into the income tax calculator. For the whole picture of what an offer pays after PF and tax, use the take-home salary calculator. And if you are self-employed and pay rent, section 10(13A) does not apply to you at all — look at section 80GG instead, which has its own much lower limits.