HRA Calculator

How the HRA Exemption Actually Works

HRA exemption under Section 10(13A) is calculated as the lowest of three amounts: (A) Actual HRA received from your employer; (B) Rent paid minus 10% of your basic salary; (C) 50% of basic salary if you live in Mumbai, Delhi, Kolkata or Chennai — or 40% for any other city. The lowest of the three is your exemption. The remainder is added to your taxable income. This calculator computes all three instantly and shows which component is the binding constraint for your specific situation.

Worked Example: Salaried Employee in Hyderabad

Basic salary: ₹70,000/month. HRA received: ₹28,000/month. Rent paid: ₹25,000/month. Hyderabad is non-metro (40%). Component A = ₹28,000. Component B = ₹25,000 − (10% × ₹70,000) = ₹25,000 − ₹7,000 = ₹18,000. Component C = 40% × ₹70,000 = ₹28,000. Exemption = ₹18,000/month (B is the lowest). Annual tax-free HRA = ₹2,16,000. Taxable HRA = ₹28,000 − ₹18,000 = ₹10,000/month.

Old Tax Regime vs New Tax Regime — The HRA Decision

HRA exemption is only available under the old tax regime. The new regime (default from FY 2023-24) offers lower slab rates but eliminates HRA, 80C, LTA and most other deductions. For many salaried individuals who pay significant rent, the old regime still wins. A rough rule: if your total annual deductions (HRA + 80C + NPS + medical) exceed ₹3.5–4 lakh, the old regime likely saves more tax. Use our Income Tax Calculator to run both scenarios before making your declaration.

Four Practical Tips to Maximise Your HRA Claim

• Pay rent to parents (legally). If you live in a house owned by your parents, pay them rent, get receipts, and they declare it as rental income. You get the exemption; they may pay less tax if in a lower bracket.
• Landlord PAN is mandatory above ₹1 lakh/year. Annual rent above ₹1 lakh requires your landlord's PAN. Without it, your employer will not process the full exemption.
• Revenue stamp on receipts above ₹5,000/month. Rent receipts for amounts above ₹5,000/month should carry a ₹1 revenue stamp and the landlord's signature.
• Submit in January–February. Final investment proof submission window is typically January–February. Late submission means higher TDS deduction in March.

What Happens if You Own a House but Still Receive HRA?

If you own a house but live in a rented property in a different city for work, you can claim both HRA exemption on rent paid and home loan interest deduction under Section 24(b). However, if you own a house in the same city where you live and work, you cannot claim HRA — the exemption requires that you are actually paying rent. Self-occupied property and HRA claim in the same city will be disallowed during ITR processing. Also check your complete salary structure using our CTC Calculator.

✓Verified by ToollyX Team · Last updated June 2026