HRA (House Rent Allowance) exemption under Section 10(13A) is the lowest of three values — actual HRA received, 50% of (Basic + DA) for metro cities (40% for non-metro), or rent paid minus 10% of (Basic + DA). The calculator computes all three and shows which one applies. Available only under the old tax regime.
What is HRA Exemption?
HRA is a salary component that companies pay employees who live in rented accommodation. A part of this allowance can be tax-free, computed under Section 10(13A) of the Income Tax Act. The exempt portion is not arbitrary — it follows a specific formula that takes the smallest of three numbers, which is why an employee earning the same HRA but paying different rent or living in different cities can have very different exemptions.
The exemption is one of the largest single deductions available to salaried renters in India — often saving ₹50,000 to ₹2 lakh per year in tax. But it has very specific eligibility: you must actually pay rent, you must receive HRA as part of your salary, and the rent payment must be documented (rent receipts, bank transfers, or rental agreement).
Importantly, HRA exemption is allowed only under the old tax regime. Under the new regime, HRA is fully taxable. This is one of the biggest factors people overlook when comparing the two regimes — for tenants in metros with high rent, the HRA exemption alone can swing the decision toward old regime by ₹50,000+ per year.
The HRA exemption formula
The exempt amount is the lowest of three calculated values. The remainder of your HRA (HRA received minus exempt portion) is added to your taxable salary.
Metro cities for HRA purposes are defined narrowly — only Delhi, Mumbai, Kolkata, and Chennai. Bangalore, Hyderabad, Pune, Gurugram, and other tier-1 cities do not qualify as metros for HRA, despite being expensive. This is a frequent source of confusion.
- Basic
- Basic salary—the basic component on your salary slip — typically 40-50% of CTC
- DA
- Dearness Allowance—applies only if it forms part of retirement benefits; usually 0 in private sector
- HRA received
- HRA component—the HRA line on your salary structure
- Rent paid
- Rent—actual annual rent you pay, with valid receipts/bank transfers as proof
How to use this calculator
Plug in your annual figures from your salary structure and rent agreement. The calculator runs all three values and shows the exempt portion automatically.
Get your annual Basic + DA
From your CTC structure or salary slip — sum up the Basic Salary plus Dearness Allowance for the full year. Most private-sector employees have DA = 0, so this is just annual Basic.
Get your annual HRA received
The HRA line on your salary slip × 12. This is the gross HRA your employer credits — what is exempt depends on the formula, but the gross is fixed.
Calculate annual rent paid
Monthly rent × 12, even if you switched houses or had vacant months (calculate actual amount paid). Make sure you have rent receipts or bank transfers as proof — required during ITR scrutiny.
Pick metro or non-metro
Only Delhi, Mumbai, Kolkata, and Chennai are metros for HRA. Bangalore, Hyderabad, Pune, Ahmedabad, and others are non-metros for HRA purposes — even though housing is expensive there. The percentage drops from 50% to 40%.
Read the result
The calculator shows the exempt amount, taxable HRA, and a comparison table of all three values. Plug the exempt amount into the Income Tax India Calculator's HRA field for full tax computation.
Common HRA scenarios
Renting in a metro vs non-metro
A ₹4 lakh annual HRA in Mumbai with ₹3.6 lakh rent gives nearly full exemption. The same scenario in Pune (non-metro) gives less because the cap drops from 50% to 40%.
Living with parents and paying rent
Allowed if you actually pay rent to your parents and they declare it as their income. The transaction must be real — bank transfer monthly, rent agreement, parents' tax filing showing the income.
Owning a home in another city
If you own a home in city A but rent in city B (where you work), HRA exemption applies to the rent in city B, while you can also claim home loan interest under Section 24 for the city A property. Both deductions stack.
Partial year as a tenant
If you rented for only part of the year, calculate HRA and rent only for those months. The 50%/40% percentage stays the same per month.
Sharing rent with roommates
You can only claim the portion you actually pay. Make sure rent receipts and bank transfers reflect your share, not the full apartment rent.
Comparing regimes
If your old-regime HRA exemption is ₹2 lakh+, that alone often makes the old regime better than new. Calculate HRA first, then run the Income Tax India Calculator under both regimes.
Common mistakes to avoid
Including the full salary instead of just Basic + DA
The formula uses only the basic salary plus DA, not the total CTC. Special allowance, LTA, conveyance, and other components are not part of the calculation.
Claiming Bangalore or Pune as metro at 50%
Use 40% for any city other than Delhi, Mumbai, Kolkata, or Chennai. Claiming metro rate for non-metro cities can lead to assessment notices.
No rent receipts or proof of payment
Keep monthly rent receipts (signed by landlord) plus bank statements showing transfers. For audit-proof claims, also keep the rental agreement.
Not reducing rent paid by 10% of Basic+DA in the third condition
The third value is rent paid MINUS 10% of (Basic + DA). Many people forget the subtraction. The calculator does it automatically.
Paying rent to a spouse
Rent paid to a spouse is not allowed for HRA exemption. The arrangement is treated as a sham. Pay rent to a non-spouse owner or to parents (if they actually own the property).
Glossary
- HRA (House Rent Allowance)
- A salary component for employees living in rented accommodation. Partly tax-exempt under Section 10(13A) of the Income Tax Act.
- Basic salary
- The fixed core component of CTC, typically 40-50%. The reference figure for HRA, PF, and gratuity calculations.
- DA (Dearness Allowance)
- An inflation-adjustment component, common in government and PSU jobs. Counted with Basic for HRA only if it forms part of retirement benefits.
- Metro city (for HRA)
- Only Delhi, Mumbai, Kolkata, and Chennai. Other cities — including Bangalore, Hyderabad, Pune, Gurugram — are non-metro and qualify for the 40% rate.
- Section 10(13A)
- The provision in the Income Tax Act that defines the HRA exemption formula. Available only under the old tax regime.
- Section 80GG
- An alternative deduction for those who pay rent but do not receive HRA. Up to ₹60,000/year or 25% of income, whichever is lower.
- Rent receipt
- A document signed by the landlord acknowledging receipt of rent. Required to prove the payment claim. Should include landlord's name, address, signature, and amount.
- Landlord PAN
- The PAN of the property owner, required when annual rent exceeds ₹1,00,000. Without PAN, exemption cannot be granted at TDS stage.
References
- Section 10(13A) — Income Tax Act 1961— Income Tax Department
- Rule 2A of Income Tax Rules — HRA computation— Income Tax Department