HRA Exemption Calculator

HRA Exemption — Section 10(13A) and the Three-Condition Test

House Rent Allowance (HRA) is a salary component that your employer pays to cover your rent. The actual HRA received is taxable, but Section 10(13A) of the Income Tax Act allows you to exempt part of it — up to a calculated limit. The exemption applies only if you are actually paying rent. If you live in your own house or with parents rent-free, you cannot claim HRA exemption.

HRA exemption is available only under the old tax regime. If you've opted for the new tax regime (default from FY 2023-24 onwards), HRA exemption does not apply — your entire HRA is fully taxable.

The exempt amount is the lowest of three figures. Always the lowest, not the highest. People often make the error of claiming the wrong figure.

• Condition 1: Actual HRA received from employer
• Condition 2: Rent paid minus 10% of basic salary (basic + DA)
• Condition 3: 50% of basic salary (if living in metro: Delhi, Mumbai, Kolkata, Chennai) OR 40% of basic salary (non-metro cities)

Metro vs Non-Metro — SEBI Has Nothing to Do With This

The 50% vs 40% split under Section 10(13A) recognizes that metropolitan rents are higher. The four metros for this purpose are Delhi, Mumbai, Kolkata, and Chennai. All other cities — including Bangalore, Hyderabad, Pune, Ahmedabad — are treated as non-metro for HRA purposes, even though their rents can exceed some Tier-1 cities.

This is frequently misunderstood. An IT professional living in Bangalore paying ₹40,000/month rent is surprised to find that the HRA calculation uses 40%, not 50%, of basic. If your company is headquartered in Mumbai but you work from Bangalore, the city where you actually reside determines the metro/non-metro status.

Worked Example — Metro Employee

Calculation for a Delhi-based employee:

• Basic Salary: ₹60,000/month
• HRA Received: ₹25,000/month
• Rent Paid: ₹20,000/month
• Condition 1: HRA received = ₹25,000
• Condition 2: Rent − 10% basic = ₹20,000 − ₹6,000 = ₹14,000
• Condition 3: 50% of basic = ₹30,000
• Exempt HRA = Minimum of ₹25,000, ₹14,000, ₹30,000 = ₹14,000/month
• Taxable HRA = ₹25,000 − ₹14,000 = ₹11,000/month

Rent Receipts, PAN of Landlord, and Documentation

If your annual rent exceeds ₹1 lakh (₹8,333/month), you must provide the landlord's PAN to your employer to claim HRA exemption. Without PAN, your employer will not process the exemption and will include the full HRA in taxable salary for TDS purposes. You can still claim the exemption when filing your ITR if you have proof of rent payment.

If the landlord doesn't have a PAN (common with individual landlords), you can submit Form 60 from the landlord. Keep rent receipts for all 12 months, the rental agreement, and bank transfer records if paying by NEFT/IMPS. Cash payments above ₹2,000 are difficult to substantiate in case of scrutiny — pay rent via bank transfer.

HRA for self-employed individuals or those in companies not providing HRA: Section 80GG allows a deduction for rent paid — up to ₹5,000/month or 25% of income or rent minus 10% of income (whichever is least) — if neither you nor your spouse owns a house in that city. This is less generous than 10(13A) but exists.