HRA Calculator

House Rent Allowance, universally called HRA, is one of the most useful tax exemptions available to salaried Indians who live in rented accommodation. Under Section 10(13A) of the Income Tax Act, a portion of the HRA component of your salary is exempt from tax, provided you actually pay rent. For an executive in Mumbai paying ₹35,000 in monthly rent, the exemption can wipe out ₹3-4 lakh from taxable income, saving ₹90,000-1,20,000 in tax depending on the slab. This HRA calculator computes the exact exemption amount based on the prescribed formula, eliminating any guesswork or risk of under- or over-claiming.

The Section 10(13A) formula prescribes that the exempt HRA is the minimum of three values: the actual HRA received from the employer, the actual rent paid minus 10% of the basic salary, and 50% of basic salary in metro cities or 40% in non-metro cities. Whichever of these three is the smallest is the legally exempt amount. The intuition is that the government doesn't want to subsidise a rent that exceeds reasonable proportions of your salary, nor an HRA component that is artificially inflated relative to the rent you actually pay.

Metro versus non-metro classification is a common source of confusion. For HRA purposes, only four cities qualify as metros: Delhi, Mumbai, Kolkata and Chennai. All other Indian cities, including major hubs like Bengaluru, Hyderabad, Pune, Ahmedabad and Gurgaon, are classified as non-metro. This means the third condition (50% versus 40% of basic) is more restrictive in non-metros, often making it the binding constraint and reducing the exemption by 10 percentage points of basic salary.

The second condition — rent paid minus 10% of basic — is the most often binding constraint for moderately priced rentals. If you pay ₹20,000 monthly rent on a basic of ₹50,000 monthly, your annual rent of ₹2,40,000 minus 10% of annual basic of ₹6,00,000 (i.e., ₹60,000) is ₹1,80,000. This is what most calculators will return as the exempt amount, regardless of how much HRA your employer pays you. To increase the exemption, the only sustainable way is to pay higher rent (in genuine accommodation) or have a higher basic salary. Inflating the rent on paper is tax fraud.

Documentation matters. To claim HRA exemption, you must submit rent receipts to your employer covering the full claim period. If your annual rent exceeds ₹1 lakh, you must also provide your landlord's PAN — the form 12BB declaration captures this. Employers will not allow exemption above this threshold without the PAN. Many employers also ask for a copy of the rent agreement, especially during year-end proof submission.

A frequently asked question is whether you can claim HRA when paying rent to parents. The Income Tax Act does not prohibit this, provided the arrangement is genuine. The parents must own the property (or be the legal tenant/sub-letter), the rent must be transferred through traceable banking channels, and the parents must declare it as 'Income from House Property' in their own ITRs (after a 30% standard deduction for property maintenance). If any of these are missing, the deduction can be challenged in scrutiny.

A related but separate question is whether you can simultaneously claim HRA exemption (for rent paid) and home loan interest deduction under Section 24(b) (for a loan on a property you own). The answer is yes, provided the two properties are in different cities or the home you own is genuinely not occupiable by you (under construction, let out, or your job posting requires you to live elsewhere). For instance, an executive who owns a flat in Pune but lives in rented accommodation in Bengaluru for a job posting can claim both.

The big caveat: HRA exemption is available only under the old tax regime. If you opt for the new tax regime to take advantage of the lower slabs and ₹75,000 standard deduction, you give up the HRA exemption along with most other deductions. For a salaried employee in a metro paying significant rent, the HRA exemption is often the single biggest reason to stay on the old regime. Run the comparison in our [income tax calculator](/income-tax-calculator-india) before deciding.

Finally, if you receive no formal HRA component in your salary but actually pay rent (common for self-employed individuals and freelancers), you can claim a similar deduction under Section 80GG, capped at ₹5,000 a month or 25% of total income (whichever is lower) minus 10% of total income. This is much smaller than the HRA exemption but is the only option for taxpayers without formal HRA.