HRA Exemption Calculator

What Is an HRA Exemption Calculator?

An HRA exemption calculator works out how much of your House Rent Allowance is tax-free under Section 10(13A) of the Income Tax Act, based on your basic salary, HRA received, actual rent paid, and whether you live in a metro or non-metro city.

HRA exemption is available only if you choose the old tax regime. It is not available under the new regime.

The Least-of-Three Rule

The exempt amount is the lowest of these three figures:

• Actual HRA received from your employer.
• 50% of basic salary plus DA for metro cities, or 40% for non-metro cities.
• Actual rent paid minus 10% of basic salary plus DA.

Only Delhi, Mumbai, Kolkata and Chennai are classified as metro cities for this calculation. Every other city, including Bengaluru, Hyderabad, Pune and Gurugram, uses the 40% limit, even though these are large metropolitan cities in the everyday sense of the word.

Worked Example

Basic salary ₹7,00,000 a year, HRA received ₹2,80,000, annual rent paid ₹2,40,000, living in Bengaluru, which is non-metro for this purpose:

The lowest of the three is ₹1,70,000, so that amount is exempt from tax. The remaining ₹1,10,000 of the HRA received is added to taxable income. The calculator also tells you which of the three limbs is the one capping your exemption, so you know which lever actually matters.

Common Mistakes When Calculating HRA

• Assuming your city is a metro because it is a major city. Only four cities count as metro for this specific calculation.
• Forgetting DA. If your salary structure includes dearness allowance that counts toward retirement benefits, it belongs in the salary figure used in the calculation.
• Not keeping rent receipts or a rental agreement. For rent above ₹1 lakh a year, you also need to provide your landlord’s PAN to claim the exemption.
• Applying the test to annual totals when things changed mid-year. If your salary, HRA, rent or city changed during the year, the test has to be applied period by period.

Key Takeaways

• HRA exemption is the lowest of three amounts: actual HRA received, 40 to 50% of basic salary depending on city, or rent paid minus 10% of basic salary.
• Only Delhi, Mumbai, Kolkata and Chennai qualify for the higher 50% metro rate; all other cities use 40%.
• HRA exemption is available only under the old tax regime, not the new one.
• Rent above ₹1 lakh a year requires your landlord’s PAN to claim the exemption when filing returns.