HRA Exemption Calculator — FY 2026-27
Calculate House Rent Allowance tax exemption under Section 10(13A) — 8 metro cities updated
The Three-Condition Formula Most HR Teams Get Wrong
HRA exemption is not a flat percentage of your salary. It is the lowest of three separate calculations — and getting even one wrong means incorrect Form 16, wrong TDS deduction, and potential mismatch at ITR filing. Many employees assume they can claim the full HRA component in their salary as tax-free. That's only true if their rent paid is high enough to make Condition 3 larger than Condition 1. In practice, the binding constraint is usually Condition 3 — rent paid minus 10% of salary. An employee in Bengaluru on ₹6 lakh basic paying ₹18,000/month rent might expect full HRA exemption, but the formula limits them to ₹1,56,000 — not the ₹2,16,000 HRA their employer pays.
Big 2026 Update: Bengaluru, Pune, Hyderabad & Ahmedabad Now Metro Cities
From FY 2026-27, four major tech and business hubs have been elevated to "metro city" status for HRA purposes — joining the original four metros of Delhi, Mumbai, Kolkata, and Chennai. This means employees in these cities now qualify for the 50% of Basic+DA limit instead of 40%. For a Bengaluru IT professional on ₹8 lakh basic paying ₹25,000/month rent, this change alone increases their HRA exemption by ₹80,000/year — saving ₹24,000+ in tax (at 30% slab).
The Three Conditions — Section 10(13A) Formula
| Condition | Formula | What it means |
|---|---|---|
| Condition 1 | Actual HRA received from employer | Upper limit — can't claim more than what employer gives |
| Condition 2 | 50% of (Basic + DA) for metro / 40% for non-metro | City-based limit |
| Condition 3 | Rent paid − 10% of (Basic + DA) | Proof-of-rent limit — ensures you actually rent |
HRA Exemption = Lowest of all three. "Salary" here means Basic + DA only. Special allowance, CTC components, performance bonus, HRA itself — none of these count in the formula base.
Step-by-Step Example: Mumbai Employee
Ramesh works in Mumbai. Basic salary: ₹60,000/month (₹7,20,000/year). DA: Nil. HRA from employer: ₹25,000/month (₹3,00,000/year). Rent paid: ₹28,000/month (₹3,36,000/year).
- Condition 1: ₹3,00,000 (actual HRA)
- Condition 2: 50% × ₹7,20,000 = ₹3,60,000 (Mumbai is metro)
- Condition 3: ₹3,36,000 − 10% × ₹7,20,000 = ₹3,36,000 − ₹72,000 = ₹2,64,000
- Exempt HRA: Lowest = ₹2,64,000
- Taxable HRA: ₹3,00,000 − ₹2,64,000 = ₹36,000
Ramesh saves ₹2,64,000 from tax. At 30% slab, that's ₹79,200 in annual tax savings — or ₹6,600 per month.
HRA Exemption vs New Tax Regime
HRA exemption is only available under the Old Tax Regime. If you opt for the New Tax Regime (which is the default from FY 2023-24), your entire HRA from employer becomes fully taxable — there is no relief under Section 10(13A). For employees with significant HRA and rent, switching to the Old Regime just for HRA can sometimes be worthwhile. Use the India Income Tax calculator to compare both regimes before deciding.