HRA Exemption Calculator
Calculate your exact HRA (House Rent Allowance) tax exemption under Section 10(13A) of the Income Tax Act. Old Regime only. Shows full working with all three conditions.
How HRA Exemption is Calculated — The Least of Three Rule
HRA (House Rent Allowance) exemption under Section 10(13A) of the Income Tax Act, 1961 is one of the most valuable tax benefits available to salaried employees in India who live in rented accommodation. The Income Tax Department uses the least of three conditions to determine the exempt amount — whichever is the lowest becomes your HRA exemption for the year.
- Actual HRA received from your employer during the financial year. This is simply the HRA component in your salary slip multiplied by 12.
- 50% of basic salary if you live in a metro city (Delhi, Mumbai, Chennai, Kolkata) or 40% of basic salary for all other cities including Bengaluru, Hyderabad, Pune, and Ahmedabad.
- Actual rent paid minus 10% of annual basic salary — this is the portion of rent that exceeds 10% of your basic salary.
The lowest of these three is your HRA exemption. The remaining HRA (total received minus exempt) is fully taxable and added to your gross taxable income.
Why Bengaluru and Hyderabad Are Non-Metro for HRA Purposes
Despite being India's top tech cities with rents often exceeding Mumbai, cities like Bengaluru, Hyderabad, Pune, Ahmedabad, and Jaipur are classified as non-metro under the Income Tax Act. This classification dates back decades and has not been revised. Employees in these cities receive only 40% of basic salary as the HRA limit — compared to 50% for workers in Delhi and Mumbai. Multiple representations have been made to update this list, but the four-city classification remains unchanged as of FY 2024-25.
How to Maximise Your HRA Exemption
The most important factor is that your rent paid should significantly exceed 10% of your basic salary — otherwise Condition 3 will be very low and limit your exemption. If your employer allows salary restructuring, consider keeping HRA at 40–50% of basic (the maximum useful amount). Always maintain proper documentation: a rent agreement, monthly receipts signed by your landlord, and if annual rent exceeds ₹1 lakh, your landlord's PAN card must be submitted to your employer. Paying rent to parents is fully legal and can be a smart tax planning strategy if parents are in a lower tax bracket.