Exact HRA exemption with a full 3-rule breakdown — free for FY 2025-26.
Updated Reviewed by Sajid Hussain· Editor
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HRA bills sellers in Indian Rupee (INR), so this calculator works in INR — not your selected US Dollar ($). Every figure below matches your real HRA statement. Localised USD marketplaces are coming soon.
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Your House Rent Allowance (HRA) can save you thousands in tax — but only if you claim exactly the right amount. The HRA exemption is determined by the minimum of three separate rules, and missing any one of them leaves money on the table. This calculator shows you all three rule amounts, identifies which one limits your exemption, and tells you the exact tax you save.
**Key concept: HRA exemption uses the minimum, not the maximum.** Many people assume they can claim their full HRA as exempt — but Rule 2A under the Income Tax Act sets a three-way limit. Your exemption is the smallest of: the HRA you actually receive, a city-percentage of your salary base, and the rent you pay minus 10% of your salary base. Even if one or two rules are generous, a low third rule pulls the exemption down.
**Metro vs non-metro city makes a meaningful difference.** Only Delhi, Mumbai, Chennai, and Kolkata qualify as metro cities for HRA purposes — residents get 50% of (Basic + DA) as the Rule 2 cap. Everywhere else in India, including Bangalore, Hyderabad, and Pune, uses the 40% non-metro rate. On a ₹50,000/month basic salary, that is a ₹60,000 difference in Rule 2 annually.
**Old regime is mandatory for HRA exemption.** The new tax regime, which became the default from FY 2023-24, does not allow any HRA exemption. If you have switched to the new regime, your full HRA is taxable. Before deciding on a regime, use this calculator to see how much HRA exemption you would lose — and weigh it against the lower slab rates the new regime offers.
**Rent receipts and landlord PAN are essential.** Claiming HRA exemption is not automatic — your employer applies it only when you submit rent receipts and, for annual rent above ₹1 lakh, your landlord's PAN. Missing the employer's January/February deadline means paying higher TDS throughout the year, and claiming a refund when you file your return.
Built for FY 2025-26, this tool uses the current Income Tax Act provisions including the Rule 2A three-limit test, the correct metro city list, and marginal slab rates to give you an accurate tax-saving estimate — not a back-of-the-envelope approximation.
Quick facts
Start with your annual basic salary and any Dearness Allowance (DA) — both from your payslip. Then enter your annual HRA received. These three figures feed into all three HRA rules. Basic is typically 40–50% of CTC; HRA is usually 40–50% of basic.
Type in your monthly rent paid to your landlord. Then toggle metro city if you live in Delhi, Mumbai, Chennai, or Kolkata — this sets Rule 2 to 50% instead of 40%. Getting the city type right is critical: Bangalore and Hyderabad are non-metro for HRA purposes.
Select old regime to see the full HRA exemption. If you are on the new regime, all three rule amounts are shown for reference, but your exemption is zero. You can use this to understand what you give up by choosing the new regime.
The calculator shows Rule 1, Rule 2, and Rule 3 amounts individually, identifies the binding rule (the minimum), and computes your annual exemption, monthly exemption, taxable HRA, and estimated income tax saved at your marginal slab rate.
Steps to use the HRA Calculator: Enter your salary structure, Enter your rent and city type, Choose your tax regime, See all three rules and your tax saving.
The exemption is the lowest of three limits: Rule 1 = Actual HRA received; Rule 2 = 50% of (Basic + DA) for metro or 40% for non-metro; Rule 3 = Annual rent paid − 10% of (Basic + DA). All three must be non-negative for any exemption to apply.
Example: Basic ₹40,000/mo, HRA ₹16,000/mo, rent ₹15,000/mo, non-metro: Rule1=₹1,92,000 | Rule2=40%×₹4,80,000=₹1,92,000 | Rule3=₹1,80,000−₹48,000=₹1,32,000 → Exempt=₹1,32,000
Whatever portion of HRA is not exempt under Rule 2A is treated as regular salary and taxed at your applicable slab rate. Under the new regime, taxable HRA = full HRA received because the exemption is zero.
Example: HRA received ₹1,92,000 − Exempt ₹1,32,000 = Taxable ₹60,000
Currency note: the example below uses a benchmark scenario priced in Indian Rupee (INR). Values are converted to US Dollar (USD) at the latest exchange rate so you can compare against your own numbers.
Scenario
An employee earning $480,000.00 annual basic salary with $192,000.00 HRA, paying $15,000.00 monthly rent, in a non-metro city on old regime.
Rule 1 is simply the HRA component on your payslip: $192,000.00 per year.
Rule 1 = $192,000.00
40% × ($480,000.00 + $0.00) = $192,000.00. Since the city is non-metro, the rate is 40%, not 50%.
Rule 2 = $192,000.00
Annual rent = $15,000.00 × 12 = $180,000.00. Deduct 10% of Basic: 10% × $480,000.00 = $48,000.00. Rule 3 = $180,000.00 − $48,000.00 = $132,000.00.
Rule 3 = $132,000.00
min($192,000.00, $192,000.00, $132,000.00) = $132,000.00. Rule 3 is the binding constraint here.
HRA Exemption = $132,000.00
Taxable HRA = HRA Received − Exemption = $192,000.00 − $132,000.00 = $60,000.00.
Taxable HRA = $60,000.00
Monthly exemption = $132,000.00 ÷ 12 = $11,000.00. At a 20.8% marginal rate (20% slab + 4% cess), annual tax saving ≈ $27,456.00.
Tax Saved ≈ $27,456.00 per year
The takeaway
On this salary and rent profile, $132,000.00 of HRA is tax-free. Only $60,000.00 is added to taxable income. The estimated annual tax saving is $27,456.00.
| Metric | Poor | Average | Good | Excellent |
|---|---|---|---|---|
Basic ₹30K/mo, rent ₹12K, non-metro Income Tax India — Section 10(13A) | Rule3 = ₹0 (rent < 10%) | Exempt ≈ ₹60,000 | Exempt ≈ ₹84,000 | Rent ≥ ₹12,001 for any benefit |
Basic ₹50K/mo, rent ₹20K, non-metro Income Tax India — Section 10(13A) | < ₹1,00,000 exempt | ₹1,20,000 exempt | ₹1,50,000 exempt | > ₹1,80,000 exempt |
Basic ₹50K/mo, rent ₹25K, metro (Delhi) Income Tax India — Section 10(13A) | < ₹1,50,000 exempt | ₹2,00,000 exempt | ₹2,40,000 exempt | > ₹2,40,000 exempt |
Basic ₹1L/mo, rent ₹40K, metro (Mumbai) Income Tax India — Section 10(13A) | < ₹3,00,000 exempt | ₹3,60,000 exempt | ₹4,80,000 exempt | Full ₹6,00,000 HRA exempt |
| Feature | Calcrux (Free) | ClearTax | ICICI Pru |
|---|---|---|---|
| Live 3-rule breakdown (Rule 1, 2, 3) | |||
| Shows which rule limits the exemption | |||
| Metro vs non-metro toggle | |||
| DA included in base salary | |||
| Estimated tax saving | |||
| New regime comparison | |||
| Free to use |
Why it matters
All three HRA rules use (Basic + DA) as the base — not gross salary, not CTC. Using gross salary will inflate your Rule 2 and Rule 3 amounts and overestimate your exemption.
Fix
Find the "Basic" line on your payslip. It is typically 40–50% of CTC. Use only this amount (plus DA if any) in the HRA calculation.
Why it matters
HRA exemption does not exist under the new tax regime. The Income Tax Act explicitly restricts Section 10(13A) to the old regime. Any claim in the new regime is invalid and may attract scrutiny.
Fix
If you pay significant rent, compare your total tax under both regimes. Sometimes the HRA saving tips the balance in favour of the old regime.
Why it matters
The Income Tax Act says "salary" in the HRA context means Basic + Dearness Allowance. Omitting DA (for those who receive it, mainly government employees) understates both Rule 2 and the 10% deduction in Rule 3.
Fix
Check your payslip for a DA component. If you receive it, enter the annual figure in the DA field — it changes all three rule values.
Why it matters
For rent exceeding ₹1 lakh annually (about ₹8,334/month), your employer is required to collect your landlord's PAN before processing the exemption. Missing this means higher TDS and a refund claim at filing time.
Fix
Get formal rent receipts for every month. Ask your landlord for their PAN. Submit these to your HR or accounts team by the employer's stated deadline (usually January/February).
Why it matters
The HRA exemption is the MINIMUM of three values — not the maximum, not the average. Misreading the rule and claiming the highest of the three is an incorrect claim that can be disallowed.
Fix
Calculate all three values, pick the smallest, and that is your exemption. This calculator shows all three so you can verify.
Only four cities — Delhi, Mumbai, Chennai, Kolkata — qualify for the 50% HRA rate. If you live in Bangalore, Hyderabad, Pune, or anywhere else, your Rule 2 cap is 40%. Do not assume; confirm before filing or submitting receipts to your employer.
If you live in a home owned by your parents and pay them rent, the HRA exemption is valid — provided the arrangement is documented (rent agreement, bank transfers, rent receipts) and your parents declare the rental income. This is a legitimate and commonly used tax planning strategy.
Collecting twelve months of receipts in January is painful. Set a reminder to collect or issue a receipt each month. Keep scanned copies stored digitally. If your landlord objects, note that a receipt is legally required in India for any rental transaction.
After submitting receipts to HR, verify the next month's payslip shows the HRA exemption being applied in your TDS calculation. If TDS has not changed, follow up — the exemption may not have been processed in time.
Your tax regime choice affects whether HRA exemption is available at all. Declare your regime preference to your employer at the start of each financial year. Run both scenarios here before April — the right choice can save 20,000–80,000 depending on your rent and salary level.
The HRA Calculator works across every stage of the workflow.
Every January, Priya (a software engineer in Bangalore on ₹12L CTC) needs to submit rent receipts to HR. She uses this calculator to confirm the exact exemption amount before submission — and to verify that her employer has applied the correct figure in her Form 16.
Arjun earns ₹18L CTC and pays ₹25,000/month rent in Gurgaon (non-metro). He uses this calculator to quantify how much HRA exemption he gives up in the new regime versus what he saves in lower slab rates — before informing his employer of his regime choice in April.
Rekha, a central government employee, receives DA as part of her pay structure. She uses this calculator to correctly include DA in the calculation base for Rules 2 and 3 — which most generic tools get wrong by ignoring DA entirely.
During payroll processing, the HR team at a Pune-based company uses this tool to verify HRA exemption amounts for employees across Mumbai (metro) and Pune (non-metro) before processing TDS adjustments — ensuring the right rate is applied for each city.
Vikram lives in his parents' house in Chennai and pays them ₹15,000/month in rent. He uses this calculator to confirm the exempt amount under all three rules and ensures the arrangement is worth formalising — turns out it saves him over ₹30,000 per year in tax.
Every important term you'll encounter in this calculator and the broader topic.
Everything you need to know about how the HRA Calculator works.
HRA (House Rent Allowance) exemption is a provision under Section 10(13A) of the Income Tax Act that allows salaried employees paying rent to exclude a portion of their HRA from taxable income. The exempt amount is the minimum of three rule-based limits — which means you save tax on that portion. For example, if ₹1,32,000 of your HRA is exempt and you are in the 20% slab, you save approximately ₹27,456 in income tax (20% slab rate plus 4% cess). The exemption is only available under the old tax regime.
HRA exemption under Rule 2A is the minimum of: (1) Actual HRA received from your employer, (2) 50% of (Basic Salary + DA) if you live in Delhi, Mumbai, Chennai, or Kolkata, or 40% for any other city, and (3) Annual rent paid minus 10% of (Basic Salary + DA). All three values must be positive for any exemption to apply. If rule 3 turns negative (your rent is less than 10% of your salary base), the entire exemption becomes nil.
Only four cities are classified as metro under the Income Tax Act for HRA calculation: Delhi, Mumbai, Chennai, and Kolkata. These cities qualify for the higher 50% rate in Rule 2. Bangalore, Hyderabad, Pune, Ahmedabad, and other large cities are NOT metro for HRA purposes — residents there get the 40% non-metro rate, even though these are major business hubs.
No. The new tax regime does not allow any HRA exemption. If you opt for the new regime, your entire HRA is treated as taxable income. HRA exemption under Section 10(13A) is exclusively available in the old tax regime. If you pay significant rent, factor this in when choosing your regime for the year — in some cases, the HRA exemption alone can make the old regime more beneficial.
Rule 3 of the HRA exemption formula is: annual rent paid minus 10% of (Basic + DA). If your rent equals or is less than 10% of your salary base, Rule 3 becomes zero or negative. Since the exemption is the minimum of all three rules, a zero Rule 3 makes your entire HRA exemption nil — even if you are paying some rent. This rule is designed to ensure the exemption is available only when rent represents a meaningful outgo.
Yes. To claim HRA exemption through your employer (which adjusts your TDS), you need to submit rent receipts for each month. Most employers ask for these in January or February. The receipts should mention the landlord's name and address, the amount paid, your name, and the rental period. For rent above ₹1 lakh in a year (around ₹8,334/month), you must also provide the landlord's PAN — without it, the employer will not process the exemption.
Yes, you can pay rent to your parents and claim HRA exemption — provided the arrangement is genuine and documented. Your parents must own the house, and the rent must actually be paid and declared as income in their tax returns. A formal rent agreement, regular bank transfers, and rent receipts are essential to substantiate the claim. The Income Tax Department has allowed this in many cases, but informal or undocumented arrangements are likely to be disallowed during scrutiny.
Rule 2A under the Income Tax Rules specifies the formula for calculating HRA exemption under Section 10(13A) of the Income Tax Act. It codifies the three-limit test: the exemption cannot exceed the actual HRA received, cannot exceed the city-based percentage of the salary base (Basic + DA), and cannot exceed the rent actually paid over 10% of the salary base. This rule ensures the exemption reflects genuine housing costs, not just the HRA component in the salary.
If HRA is not part of your salary structure, you cannot claim the Section 10(13A) exemption — that is only for employees who formally receive HRA. However, if you pay rent, you may be able to claim a deduction under Section 80GG instead. Section 80GG is available to salaried employees who don't receive HRA or self-employed individuals, subject to a limit of ₹5,000 per month or 25% of total income, whichever is less, minus 10% of adjusted total income.
Yes. All three rules of the HRA exemption use (Basic Salary + Dearness Allowance) as the base, not just Basic. DA is relevant primarily for central government employees and PSU workers — most private sector employees receive zero DA. If you receive DA, including it will change your Rule 2 and Rule 3 amounts. The calculator handles this correctly: enter your annual DA in the dedicated field and all three rules will be recalculated.
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