HRA Calculator: How to Calculate HRA Exemption Under Section 10(13A)

House Rent Allowance shows up on almost every salary slip in India, but the amount you actually get to keep tax-free is rarely the full HRA figure. It depends on a three-way comparison set out in the Income Tax Act, and the answer changes depending on your city, your rent, and which tax regime you've picked. This guide walks through that formula step by step. Use the HRA calculator alongside it if you want to plug in your own numbers.

A note on citations: the Income-tax Act, 1961 was replaced by the Income-tax Act, 2025, which came into force on 1 April 2026 and governs income earned in the current financial year. The HRA exemption itself is unchanged in substance, but its section number has been renumbered as part of that reorganisation. This guide refers to it by its long-familiar 1961 Act number, Section 10(13A), since that's what's most widely recognised, and notes the new Act by name here rather than citing an unconfirmed new section number.

What Is HRA and Who Can Claim the Exemption

HRA, or House Rent Allowance, is a component of salary that employers pay to help cover the cost of rented housing. It's separate from basic pay and typically shows up as its own line item on a payslip. Most people first come across the term "HRA calculator" when they're trying to figure out how much of that allowance actually escapes tax.

The exemption is available under Section 10(13A) of the Income Tax Act, 1961, read with Rule 2A of the Income Tax Rules, 1962. A few conditions have to be met before any of it applies. First, the person claiming it has to be a salaried employee who actually receives HRA as part of their salary structure; it isn't available to the self-employed, though a separate and much smaller deduction under Section 80GG exists for them. Second, the employee has to actually be paying rent for the place they live in. Third, that rented accommodation can't be owned by the employee, their spouse, or their minor child; if it is, there's no rent being paid to a third party and no exemption to claim.

Who typically qualifies:

• Salaried employees who receive HRA as part of their CTC and live in rented accommodation
• Employees paying rent to a landlord, including a parent or relative, provided the payment is genuine and documented
• Employees who have stayed on the old tax regime for the relevant financial year

Who typically doesn't:

• Employees living in a house they, their spouse, or their minor child owns
• Self-employed individuals (who may instead look at Section 80GG)
• Employees who have opted for the new tax regime, covered later in this guide

If you're not sure whether HRA is a separate component in your salary structure, your appointment letter or payslip should show it broken out from basic pay.

The Three-Condition HRA Exemption Formula

The exempt part of HRA isn't simply whatever amount your employer pays you. Under Rule 2A, it's the least of three amounts:

1. The actual HRA received from the employer
2. Rent paid, minus 10% of salary
3. 50% of salary if the rented accommodation is in a metro city, or 40% of salary elsewhere

Here, "salary" means basic pay plus dearness allowance, where the DA forms part of retirement benefits, plus commission if it's a fixed percentage of turnover. It does not include bonuses, special allowances, or any other part of a CTC package.

Take a salaried employee with a basic salary of ₹30,000 a month, HRA of ₹15,000 a month, and rent paid of ₹20,000 a month, living in a non-metro city. On an annual basis, that works out to a basic salary of ₹3,60,000, HRA received of ₹1,80,000, and rent paid of ₹2,40,000. The three amounts to compare are: actual HRA of ₹1,80,000; rent paid minus 10% of salary, which is ₹2,40,000 − ₹36,000 = ₹2,04,000; and 40% of salary, which is ₹1,44,000. The lowest of the three is ₹1,44,000, so that's the exempt amount, and the remaining ₹36,000 of HRA gets added to taxable salary.

Employee A's entire HRA is exempt in a metro city, since the rent-linked and 50%-of-salary figures both exceed the actual HRA received. Employee B ends up with the same exempt amount in both metro and non-metro cities in this particular example, because rent paid minus 10% of salary happens to be the smallest of the three figures either way. That's a reminder that the "least of three" test doesn't always move in the direction you'd expect just from knowing the metro or non-metro rate.

Metro vs Non-Metro Cities: Why the Rate Differs

The third condition in the Rule 2A formula uses 50% of salary for metro cities and 40% for everywhere else. Under the Income Tax Department's own guidance for computing this exemption, only Delhi, Mumbai, Kolkata, and Chennai count as metro cities for this purpose. Every other city, including Bengaluru, Hyderabad, Pune, and Gurugram, falls under the 40% non-metro rate regardless of local rent levels or cost of living.

This distinction exists because rents in the four metro cities have historically run higher than in the rest of the country, so the rule allows a larger share of salary to be treated as housing-related exemption there. It doesn't adjust for the fact that some non-metro cities now have rents comparable to or higher than certain metro areas; the classification is fixed to those four cities rather than tied to actual local rent data.

The city that matters for this calculation is the one where the accommodation is located, not the city where the employer's office sits. Someone who works from a metro office but rents accommodation outside it uses the non-metro rate for the exemption, and the reverse applies too. If your work involves a transfer partway through the year, the metro or non-metro rate applies separately to each period based on where you were actually renting at the time, since Rule 2A computes the exemption period by period rather than as a single annual figure.

Documents Needed: Rent Receipts and PAN of Landlord

Claiming the exemption requires proof that rent was actually paid, not just a stated intention to pay it. Employers typically ask for this documentation before including the exemption in monthly TDS calculations, and it's asked for again if the exemption is claimed directly while filing an income tax return.

The basic paperwork includes rent receipts for each period being claimed, signed by the landlord, along with a rent agreement if one exists. Under CBDT Circular No. 01/2019 (updating the position first set out in Circular No. 8/2013), if the annual rent paid exceeds ₹1,00,000, the employee also needs to furnish the landlord's PAN to the employer; if the landlord doesn't have a PAN, a signed declaration from the landlord stating this, along with their name and address, is generally accepted instead. Employees receiving HRA of up to ₹3,000 a month have historically been permitted to skip producing rent receipts, though keeping them on file is still worth doing.

Rent paid to a parent or other family member can be claimed, provided the payment is genuine, actually transferred, and properly documented. The Income Tax Department has, in past assessments, disallowed such claims where the arrangement looked like a paper transaction rather than an actual tenancy. Keeping bank transfer records rather than cash payments, along with a proper rent agreement, makes this kind of claim considerably easier to defend if it's ever questioned.

Missing this documentation doesn't necessarily mean the exemption is lost forever. If an employer doesn't have the paperwork in time to adjust TDS during the year, the employee can still claim the exemption directly while filing their income tax return, provided the underlying rent payment and eligibility conditions are genuinely met.

Is HRA Available Under the New Tax Regime?

No. The HRA exemption under Section 10(13A) is available only to taxpayers who have opted for the old tax regime. Under the new tax regime, introduced through Section 115BAC of the 1961 Act and continued under the Income-tax Act, 2025, this exemption is one of the specified deductions and allowances that gets excluded, along with most of the other exemptions and Chapter VI-A deductions available under the old regime.

This means that for someone under the new regime, the entire HRA received from their employer is added to taxable salary, with no exemption calculation to perform at all. The three-condition test in this guide only applies if the old regime has been chosen for that financial year.

Salaried individuals with no business or professional income are generally permitted to choose between the old and new regime each year at the time of filing their return, based on whichever works out better given that year's income and available deductions. Someone paying substantial rent in a metro city, with HRA forming a meaningful share of their CTC, will often find the old regime works out cheaper purely because of this exemption, even before accounting for other deductions like 80C investments or a home loan. Running the numbers under both regimes, rather than assuming one is automatically better, is the only reliable way to know which applies in a given case. The HRA calculator can help with the old-regime side of that comparison.

Is This Right For You?

This guide covers the standard HRA exemption computation that applies to most salaried employees paying rent to an unrelated landlord. It isn't a substitute for professional advice if you're renting from a family member and want the arrangement to hold up to scrutiny, if you've had a mid-year transfer between metro and non-metro cities, or if the amounts involved are large enough that getting the regime choice wrong would be costly. A chartered accountant familiar with your specific salary structure is better placed to advise in those situations.

Conclusion

HRA exemption comes down to a three-way comparison between actual HRA received, rent paid in excess of 10% of salary, and a fixed percentage of salary that depends on whether you live in one of four metro cities. Getting the "salary" figure right, meaning basic pay plus qualifying DA and nothing else, and keeping rent receipts and landlord PAN details in order, are what make the difference between a smooth claim and a rejected one. None of this applies if you've moved to the new tax regime, where HRA is simply added to taxable income in full.

To run your own numbers through this formula, use the HRA calculator, and see the complete HRA exemption rules guide for a deeper look at edge cases like family rent payments and mid-year city changes. For a wider look at how HRA fits into your overall pay structure, the EPF calculator guide and gratuity calculator guide cover two other salary components that interact with the same old-versus-new regime choice.

FAQs

Is HRA exemption available if I live in my own house?

No. One of the basic conditions under Section 10(13A) is that the accommodation must not be owned by the employee, their spouse, or their minor child. If you live in a house you own, there's no rent being paid to anyone, so there's no exemption to calculate. You can still receive HRA as a salary component, but the entire amount becomes taxable in this situation.

What documents do I need to claim HRA exemption?

Rent receipts signed by your landlord for each period claimed, and a rent agreement where one exists. If your annual rent exceeds ₹1,00,000, you also need your landlord's PAN, or a signed declaration from them if they don't have one, as required under CBDT Circular No. 01/2019. Keep bank transfer records if you're paying rent to a family member.

Is HRA taxable under the new tax regime?

Yes, in full. Section 10(13A) is one of the exemptions excluded under the new tax regime rules (Section 115BAC of the 1961 Act, continued under the Income-tax Act, 2025 now in force). Taxpayers who have opted for the new regime cannot claim any HRA exemption, so the entire HRA received from the employer is added to taxable salary, regardless of actual rent paid.

How is HRA calculation different in a metro vs non-metro city?

The formula is identical except for one figure: the salary percentage used in the third condition. It's 50% of salary for accommodation in Delhi, Mumbai, Kolkata, or Chennai, the only cities the Income Tax Department treats as metros for this purpose, and 40% of salary everywhere else. The exempt amount is still the least of all three conditions, so a higher metro percentage doesn't automatically mean a higher exemption.

Sources

• Income Tax Department, Schedule 10(13A) – House Rent Allowance: official guidance confirming the least-of-three formula (actual HRA, rent paid minus 10% of salary, 50%/40% of salary) and that the exemption doesn't apply under the new tax regime
• Income Tax Department, "Salary" reference page: confirms metro cities for the 50% rate are limited to Delhi, Mumbai, Kolkata, and Chennai, and cites CBDT Circular No. 01/2019 for the landlord PAN and Form 12BB requirement
• Income-tax Act, 1961: Section 10(13A), the statutory basis for the exemption, read with Rule 2A of the Income-tax Rules, 1962
• CBDT Circular No. 01/2019, dated 1 January 2019 (updating the position first set out in Circular No. 8/2013): landlord PAN, or a declaration where the landlord has none, required where annual rent paid exceeds ₹1,00,000
• Income Tax Department, FAQs on New Tax Regime vs Old Tax Regime: confirms HRA exemption under Section 10(13A) is not available under the new tax regime
• CBDT, official press release: confirms the Income-tax Act, 2025 came into force on 1 April 2026, replacing the Income-tax Act, 1961, for income earned from FY 2026-27 onward

Tax rules and exemption limits are set by statute, rule, and CBDT notification, and can change. Confirm the current figures and city list against the Income Tax Department's website before relying on this guide for a large HRA claim. Note also that the Income-tax Act, 2025 has replaced the 1961 Act referenced throughout this guide; the exemption itself is unchanged in substance, but its section number has been renumbered — see the note below the introduction.