HRA Calculator
Find how much of your House Rent Allowance is tax-free — the least of three statutory limits, with the taxable balance shown alongside.
What is House Rent Allowance (HRA) and How is it Exempted?
House Rent Allowance (HRA) is a standard compensation allowance paid by employers to employees to subsidize accommodation and rental living expenses. Governed by Section 10(13A) of the Income Tax Act, 1961 read with Rule 2A of the Income Tax Rules, HRA is not automatically 100% tax-free; rather, it is eligible for partial or full tax exemption based on a statutory least-of-three calculation.
To claim HRA exemption legally, an employee must satisfy three basic statutory prerequisites: (1) HRA must be a distinct component in the employment compensation package, (2) The employee must actually occupy rented residential accommodation, and (3) The employee must actually incur rent expenditure for that residence.
The Section 10(13A) / Rule 2A Least-of-Three Rule
Exempt HRA = Least of [ A, B, C ]
- Limit A: Actual House Rent Allowance (HRA) received from employer during the financial year
- Limit B: Actual Rent Paid minus 10% of statutory Salary for the relevant period
- Limit C: 50% of Salary for accommodation in Metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40% of Salary for all Non-Metro locations
- Taxable HRA: Actual HRA Received − Exempt Amount (added to taxable salary income)
Definition of "Salary" and Metro vs Non-Metro Rules
For Section 10(13A) exemption calculations, "Salary" does not mean your gross CTC; it is strictly defined as:
- Basic Salary plus
- Dearness Allowance (DA), provided DA enters into retirement benefit computations as per employment terms, plus
- Commission, if paid as a fixed percentage of sales turnover.
- All other allowances (special allowance, medical reimbursements, transport allowance) are excluded.
Metro Classification: Only four municipal corporations qualify for the 50% threshold: Delhi, Mumbai, Kolkata, and Chennai. All other tech hubs and state capitals—including Bengaluru, Hyderabad, Pune, Gurugram, Noida, and Jaipur—are classified as Non-Metro (40% limit) under tax law.
Worked example: ₹20,000 Monthly Rent in a Metro City
Consider a salaried employee working in Delhi (Metro) with a basic salary of ₹60,000/month, receiving ₹25,000/month HRA, and paying ₹20,000/month rent:
- Annual Basic Salary: ₹7,20,000 | Annual HRA Received: ₹3,00,000 | Annual Rent Paid: ₹2,40,000
- Limit A (Actual HRA Received): ₹3,00,000
- Limit B (Rent Paid − 10% of Basic): ₹2,40,000 − (10% of ₹7,20,000) = ₹2,40,000 − ₹72,000 = ₹1,68,000 (₹14,000/month)
- Limit C (50% of Basic in Metro): 50% of ₹7,20,000 = ₹3,60,000
- Least of A, B, and C: ₹1,68,000
- Annual Exempt HRA: ₹1,68,000 (₹14,000/month)
- Annual Taxable HRA: ₹3,00,000 − ₹1,68,000 = ₹1,32,000 (₹11,000/month)
HRA Exemption Across Different Rent Levels (₹60,000/mo Basic)
| Monthly Rent Paid | Actual HRA Received | Rent − 10% Basic | 50% Metro Limit | Exempt Monthly HRA | Taxable Monthly HRA |
|---|---|---|---|---|---|
| ₹10,000 | ₹25,000 | ₹4,000 | ₹30,000 | ₹4,000 | ₹21,000 |
| ₹15,000 | ₹25,000 | ₹9,000 | ₹30,000 | ₹9,000 | ₹16,000 |
| ₹20,000 | ₹25,000 | ₹14,000 | ₹30,000 | ₹14,000 | ₹11,000 |
| ₹25,000 | ₹25,000 | ₹19,000 | ₹30,000 | ₹19,000 | ₹6,000 |
| ₹31,000 | ₹25,000 | ₹25,000 | ₹30,000 | ₹25,000 (Fully Exempt) | ₹0 |
Landlord PAN Requirement and Compliance Rules
Under CBDT Circular guidelines, if your annual rent paid exceeds ₹1,00,000 per financial year (more than ₹8,333 per month), it is mandatory to provide your landlord's Permanent Account Number (PAN) to your employer to claim HRA tax exemption.
If the landlord does not possess a PAN, a signed Form 60 declaration must be obtained. Furthermore, if rent paid exceeds ₹50,000 per month, the tenant is legally required under Section 194-IB to deduct 5% TDS on the rent and remit it using Form 26QC.
Crucial Rules: Paying Rent to Parents vs New Tax Regime
Two vital tactical considerations apply to modern HRA planning:
- Paying Rent to Parents: If you reside in a residential property owned legally by your parents, you can legally pay them rent, execute a rent agreement, transfer funds via banking channels, and claim HRA exemption. The parents must declare this rental income in their personal ITR (which can be tax-advantageous if they are retired or in lower tax brackets). You cannot pay rent to your spouse.
- New Tax Regime Exclusion: Section 10(13A) HRA exemption is completely disallowed under the New Tax Regime. If you opt for the New Regime, your entire HRA is 100% taxable as salary.
Frequently Asked Questions on HRA
Statutory limits, metro definitions, landlord PAN rules, paying rent to parents, and regime selection.
No. HRA exemption under Section 10(13A) is strictly available only under the Old Tax Regime. Under the New Tax Regime (Section 115BAC), HRA is fully taxable as regular salary. First check with our Income Tax Calculator whether Old or New Regime yields lower total tax.
Exempt HRA is the least of: (1) Actual HRA received from employer, (2) Actual rent paid minus 10% of basic salary plus DA, or (3) 50% of basic salary for metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40% of basic salary for non-metro cities.
Under the Income Tax Rules framed in 1962, the 50% metro rule applies exclusively to four constitutionally defined municipal cities: Delhi, Mumbai, Kolkata, and Chennai. All other major urban economic centers—including Bengaluru, Hyderabad, Pune, and Gurugram—are classified as non-metro (40% limit).
Yes, if total rent paid exceeds ₹1,00,000 per financial year (exceeding ₹8,333 per month), quoting the landlord's valid PAN is mandatory. Failure to submit landlord PAN to your employer will result in HRA exemption being denied in Form 16.
Yes, provided your parents are the legal owners of the residential property. You must execute a formal rental agreement, transfer rent through verifiable banking channels (NEFT/UPI), and obtain rent receipts. Your parents must report the rental income in their personal income tax returns.
No. The relationship between husband and wife is not considered a commercial landlord-tenant relationship under Indian tax law. Tax tribunals and the CBDT have consistently rejected HRA claims based on rent payments to a spouse.
Yes, if you own a residential house in one city (or far from your workplace) but reside in a rented house closer to your employment location for genuine commercial or logistical reasons. You can claim Section 24(b) interest deduction on your home loan and Section 10(13A) HRA exemption together.
If you pay rent for residential accommodation but do not receive any HRA from your employer (or if you are self-employed), you can claim a deduction under Section 80GG of the Income Tax Act up to a maximum of ₹5,000 per month (₹60,000 per year) under the Old Regime.
You must submit: (1) Rent receipts signed by the landlord (with revenue stamp for cash payments >₹5,000), (2) Copy of registered or notarized rent agreement, and (3) Landlord’s PAN copy if annual rent exceeds ₹1,00,000.
HRA exemption is calculated on a month-to-month basis for the exact period during which you actually occupied rented accommodation and paid rent. For months where you stayed in your own house or company accommodation, HRA received is fully taxable.