🏠 HRA Calculator — House Rent Allowance Exemption
📌 FY 2026-27 Update: 8 Metro Cities now at 50% (Mumbai, Delhi, Kolkata, Chennai + NEW: Bengaluru, Pune, Hyderabad, Ahmedabad). All others = 40%. HRA exemption available only under Old Tax Regime.
Condition 1: HRA Received (Annual)₹ —
Condition 2: 50%/40% of Basic+DA (Annual)₹ —
Condition 3: Rent Paid − 10% Basic+DA (Annual)₹ —
HRA Exemption (Minimum of 3 conditions)₹ —
Taxable HRA (Annual)₹ —
Annual Tax Saving on HRA₹ —
Monthly Tax Saving₹ —
HRA Exemption — How It Works (FY 2026-27)
House Rent Allowance (HRA) is one of the most valuable tax-saving components in a salaried employee's pay structure. Under Section 10(13A) of the Income Tax Act, the portion of HRA that qualifies as exempt is not taxable — reducing your taxable income and tax liability significantly. For a person in the 30% tax bracket paying ₹25,000/month rent in Bengaluru, the annual HRA exemption can save over ₹60,000 in taxes.
Critical FY 2026-27 change: The Income Tax Rules 2026 expanded the metro city list from 4 to 8 cities, effective April 1, 2026. Bengaluru, Pune, Hyderabad, and Ahmedabad now qualify for the 50% HRA rate (up from 40% previously) — a welcome relief for millions of IT and corporate employees in these cities.
The 3-Condition HRA Exemption Formula
HRA exemption is the minimum of three amounts:
- Condition 1: Actual HRA received from your employer
- Condition 2: 50% of (Basic + DA) for metro cities / 40% for non-metro cities
- Condition 3: Actual rent paid minus 10% of (Basic + DA)
The exemption equals the lowest of these three values. The remaining HRA (above the exemption) is added to your taxable income.
HRA Exemption Examples (FY 2026-27)
| City | Basic Salary (Monthly) | HRA Received | Rent Paid | HRA Exempt (Annual) | Tax Saved (20%) |
|---|---|---|---|---|---|
| Mumbai (metro 50%) | ₹60,000 | ₹25,000 | ₹22,000 | ₹2,04,000 | ₹40,800 |
| Bengaluru (NEW metro 50%) | ₹70,000 | ₹30,000 | ₹28,000 | ₹2,52,000 | ₹50,400 |
| Pune (NEW metro 50%) | ₹55,000 | ₹22,000 | ₹18,000 | ₹1,56,000 | ₹31,200 |
| Jaipur (non-metro 40%) | ₹45,000 | ₹15,000 | ₹10,000 | ₹54,000 | ₹10,800 |
8 Metro Cities for HRA (FY 2026-27)
| City | HRA Rate | Change |
|---|---|---|
| Mumbai | 50% | Unchanged |
| Delhi (NCR) | 50% | Unchanged |
| Kolkata | 50% | Unchanged |
| Chennai | 50% | Unchanged |
| Bengaluru | 50% (NEW) | Was 40%, now 50% from FY26-27 |
| Hyderabad | 50% (NEW) | Was 40%, now 50% from FY26-27 |
| Pune | 50% (NEW) | Was 40%, now 50% from FY26-27 |
| Ahmedabad | 50% (NEW) | Was 40%, now 50% from FY26-27 |
| All other cities | 40% | Non-metro |
⚠️ For FY 2025-26 ITR (filing by July 2026): Use the old 4-city metro list. The 50% rate for Bengaluru, Pune, Hyderabad, Ahmedabad applies only from April 1, 2026 (FY 2026-27). Do not apply the new list retroactively for FY 2025-26 returns.
HRA Tips — Maximise Your Tax Saving
- Negotiate HRA structure: Ask your HR to increase the HRA component in your CTC. Many employers allow restructuring within the same gross package. A higher HRA means more potential exemption (up to Condition 1 limit).
- Rent to parents legally: If you live with your parents, you can pay rent to them and claim HRA. Your parents must include this rent income in their ITR. This works best when parents are in a lower tax slab — the family saves tax overall. The arrangement must be genuine, with proper rent receipts and bank transfers (not cash).
- Landlord PAN mandatory above ₹1 lakh/year: If your annual rent payments exceed ₹1 lakh (₹8,333/month), you must collect and submit your landlord's PAN to your employer. Rent receipts with revenue stamp required if monthly rent exceeds ₹5,000.
- Form 12BB / Form 124: From FY 2026-27, Form 12BB is replaced by Form 124 (Income Tax Rules 2026). Submit it to your employer at the start of the year with rent receipts and landlord details. This enables proper TDS computation.
- New Regime users — HRA not available: HRA exemption under Section 10(13A) is not available under the New Tax Regime. If you're in the New Regime, your full HRA is part of taxable salary. Switch to Old Regime only if HRA + other deductions make it worthwhile net.
HRA FAQs
Q. Can I claim both HRA and home loan tax benefit?
Yes, in specific circumstances. If your home is in a different city from where you work (e.g., you own a flat in your hometown but rent in the city you work), you can claim HRA for rent paid and also deduct home loan interest under Section 24(b) for your owned property. This dual benefit is legal and upheld by various court rulings. However, if you own a home in the same city where you work and live there, you cannot claim HRA exemption (since you're not renting).
Q. What if I didn't submit rent receipts to my employer — can I still claim HRA while filing ITR?
Yes. Even if you didn't submit Form 12BB or rent receipts to your employer during the year (so TDS was deducted on full HRA), you can still claim the HRA exemption while filing your ITR. Calculate the exempt HRA using the three-condition formula, declare it under Section 10(13A), and claim the excess TDS deducted as a refund. Keep rent receipts and landlord's PAN safe for any future assessment.
Q. What counts as "salary" for HRA calculation — is it gross salary or basic?
For HRA calculation, "salary" is specifically defined as: Basic Salary + Dearness Allowance (DA forming part of retirement benefits) + Commission as a fixed percentage of turnover. It does NOT include HRA itself, special allowances, bonus, LTA, medical allowance, or any other component. Most private sector employees have zero DA, so their HRA "salary" is simply their basic pay. This is one of the most common mistakes in manual HRA calculation.
Q. I moved from Jaipur (non-metro) to Bengaluru mid-year. How do I calculate HRA?
Calculate HRA separately for each period. For months in Jaipur: use 40% (non-metro) in Condition 2. For months in Bengaluru (April 2026 onwards): use 50% (new metro rate under FY2026-27 rules). Add both periods' exemptions to get the total annual HRA exemption. Most ITR software and payroll systems handle this proportionate calculation automatically when you report the city change to HR.