How the HRA Calculator works
House Rent Allowance (HRA) is a part of your salary that can be partly tax-exempt if you live in rented accommodation. Under Section 10(13A) of the Income Tax Act, the exempt portion is the least of three amounts, and whatever is left over is added to your taxable income.
Exemption is the least of:
- Actual HRA received from your employer
- Rent paid − 10% of (Basic + DA)
- 50% of (Basic + DA) for metro cities, or 40% for non-metro cities
Exempt HRA = min( HRA received, Rent − 10% of salary, 50%/40% of salary )
Worked example
Suppose your Basic + DA is ₹6,00,000 a year, you receive ₹2,40,000 HRA and pay ₹2,16,000 rent in a metro city. The three amounts are: actual HRA ₹2,40,000; rent − 10% of salary = ₹2,16,000 − ₹60,000 = ₹1,56,000; and 50% of salary = ₹3,00,000. The least is ₹1,56,000, so ₹1,56,000 is exempt and the remaining ₹84,000 is taxable. The bars on the right show these three amounts and highlight the smallest one, which becomes your exemption.
Things to keep in mind
- The HRA exemption is available only under the old tax regime. The new regime does not allow it.
- Metro cities for this rule are Delhi, Mumbai, Kolkata and Chennai (50%); all other cities are treated as non-metro (40%).
- If your annual rent exceeds ₹1,00,000, you must report your landlord's PAN to claim the exemption, and you should keep rent receipts.
- You must actually pay rent to claim HRA; you cannot claim it for a house you own and live in. Self-employed people or salaried people without HRA can claim rent relief under Section 80GG instead.
