HRA Exemption Calculator

House Rent Allowance (HRA) under Section 10(13A) is a tax exemption available to salaried employees living in rented accommodation. The exempt portion is the LEAST of three: actual HRA received, rent paid minus 10% of Basic+DA, and 50% (metro) or 40% (non-metro) of Basic+DA. The minimum of these three values is what you can claim — anything above goes back into taxable salary.

Only Basic + DA count for HRA computation, not Special Allowance, bonuses, or other components. Many companies design pay packets to maximise HRA by setting a higher Basic component — this directly increases the exemption ceiling. Negotiating a higher Basic at offer time often saves more tax than negotiating overall CTC.

Metro classification is strict: only Mumbai, Delhi, Chennai, and Kolkata qualify for the 50% rate. Bangalore, Hyderabad, Pune, Ahmedabad, and all other cities are non-metro at 40%. This 10-percentage-point difference can mean ₹50,000+ extra tax saving for high-rent tenants.

For monthly rent above ₹3,000, keep monthly rent receipts signed by the landlord. Receipts should include landlord name, address, PAN (if rent > ₹1L/year), tenant name, address of property, period covered, amount paid, and signature.

For annual rent above ₹1 lakh, the landlord's PAN is mandatory under Form 12BB. If the landlord doesn't have PAN, you can submit a declaration Form 60. Pay rent via bank transfer or cheque rather than cash — this creates an unambiguous audit trail in case of scrutiny.

If you live with parents and pay rent to them, ensure: (1) parent owns the property, (2) bank-transfer rent monthly, (3) parent declares the rent as 'Income from House Property' in their ITR. This setup is fully legal and can save substantial tax — but is a common audit trigger if any leg of the documentation is missing.

HRA exemption is only available in the Old Regime under Section 10(13A). If you opt for the New Regime under Section 115BAC, the entire HRA received becomes taxable salary. Most metro renters paying realistic rent save more tax under the Old Regime because of HRA alone.

Quick rule of thumb: if your eligible HRA exemption is above ₹1.5 lakh, the Old Regime almost always wins for salaries up to ₹15 lakh. Above ₹15 lakh, the New Regime's lower slab rates start to compete unless you also have ₹1.5L 80C, ₹50K 80CCD(1B), and home-loan interest deductions stacked.

Use the IndCalc Income Tax Calculator to see the exact regime comparison after entering your HRA exemption. Toggle between New and Old Regimes to see total in-hand salary side-by-side — this beats any rule of thumb.