HRA Exemption Calculator

Exempt HRA is the least of three amounts under Section 10(13A) of the Income-tax Act, 1961 read with Rule 2A of the Income-tax Rules, 1962: (1) actual HRA received; (2) rent paid minus 10% of salary; (3) 50% of salary in a listed metro city, else 40%. Whatever remains of your HRA above that least amount is taxable salary.

"Salary" here means basic pay, plus dearness allowance where it forms part of retirement benefits, plus commission earned as a fixed percentage of turnover — nothing else. A worked example, straight from this page's engine:

• Inputs: basic ₹40,000/month, DA ₹10,000/month, HRA ₹20,000/month, rent ₹25,000/month, Mumbai, FY 2025-26. Salary = ₹6,00,000/year.
• Limb 1 — actual HRA received: ₹2,40,000.
• Limb 2 — rent ₹3,00,000 − 10% of salary ₹60,000 = ₹2,40,000.
• Limb 3 — 50% of salary (Mumbai): ₹3,00,000.
• Exempt HRA = ₹2,40,000 (the least). Taxable HRA = ₹0.

The calculator above shows the same three-limb breakdown for your numbers — the limbs are the answer, not just the final figure, because knowing which limb binds tells you what actually moves your exemption (more rent moves limb 2; a metro move changes limb 3; a raise moves both in opposite directions).

For FY 2025-26 (AY 2026-27), Rule 2A(c) gives the 50%-of-salary limb only to accommodation in Delhi, Mumbai, Kolkata and Chennai — the four cities named (as Bombay, Calcutta, Delhi and Madras) when the rule was framed. Every other city, including Bengaluru, Hyderabad, Pune and Ahmedabad, is 40% under Rule 2A(d).

From FY 2026-27 that finally changes. The Income-tax Rules, 2026 — notified by the CBDT on 20-03-2026 (G.S.R. 198(E)), effective 01-04-2026 under the Income-tax Act, 2025 — expand the 50% list to eight cities: Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru. Any other place stays at 40%. (The HRA exemption itself moves to Schedule III of the 2025 Act; the three-limb formula is unchanged.)

What the change is worth, engine-computed: basic ₹50,000/month, HRA ₹22,000/month, rent ₹30,000/month in Bengaluru —

• FY 2025-26 (40% limb): limbs ₹2,64,000 / ₹3,00,000 / ₹2,40,000 → exempt ₹2,40,000.
• FY 2026-27 (50% limb): limbs ₹2,64,000 / ₹3,00,000 / ₹3,00,000 → exempt ₹2,64,000.

Same salary, same rent — ₹24,000 more exempt purely because the limb-3 factor moves from 40% to 50%. Use the FY toggle above to see both years for your own numbers; when a newly added city is selected for FY 2026-27, the result carries the Rules-2026 citation so you know which list produced it.

No — and this is the single biggest HRA mistake. Under Section 115BAC, the default tax regime since FY 2023-24, the Section 10(13A) exemption is switched off entirely. If you are in the new regime, every rupee of HRA is taxable salary, whatever your rent.

The exemption exists only in the old regime. That makes HRA one of the deciding factors in the old-vs-new choice: a large HRA exemption, stacked with 80C, 80D and home-loan interest, is precisely the deduction bundle that can pull the old regime ahead. A salaried employee (no business income) can pick the regime fresh every year, so the right move is to compute the exemption here, then feed it into an old-vs-new regime comparison as part of your old-regime deductions before you submit the year's declaration.

One nuance: rent paid > ₹1,00,000 a year needs your landlord's PAN in the employer declaration (Rule 26C) — a procedural requirement, not a limb of the computation, but a claim without it will not survive employer or department checks.

Rule 2A defines the salary base narrowly, and getting it wrong changes every limb:

• Basic salary — always included.
• Dearness allowance — only where the terms of employment provide that it counts for retirement benefits (PF, gratuity, pension). DA paid without that character is excluded.
• Commission as a fixed percentage of turnover — included, per the Supreme Court in Gestetner Duplicators (P) Ltd v CIT (1979). Ad-hoc or discretionary commission is not.
• Everything else — special allowance, bonus, LTA, perquisites — excluded.

Counter-intuitively, a bigger salary base is not always better for the exemption: limb 2 subtracts 10% of salary from rent, so extra salary shrinks limb 2 even as it grows limb 3. Engine-computed: take the Mumbai example (basic ₹40,000, DA ₹10,000, HRA ₹20,000, rent ₹25,000 — exempt ₹2,40,000) and add turnover commission of ₹5,000/month. Salary rises to ₹6,60,000, limb 2 falls to ₹3,00,000 − ₹66,000 = ₹2,34,000, and the exemption drops from ₹2,40,000 to ₹2,34,000. The calculator's commission field exists exactly so this effect shows up in your own numbers instead of surprising you at filing.

The computation is only half the claim — the paper trail is the other half:

• Rent receipts (or a rent agreement plus bank-transfer proof). Receipts need the landlord's name, address, rent amount and period; a revenue stamp is customary for cash payments above ₹5,000.
• Landlord's PAN where annual rent exceeds ₹1,00,000 — Rule 26C read with Form 12BB and CBDT Circular 08/2013. No PAN → a signed declaration from the landlord with name and address.
• The employer declaration itself — Form 12BB for FY 2025-26. For FY 2026-27 declarations the Income-tax Act, 2025 machinery replaces it with Form 124 (Section 392(5)(b) read with Rule 205, Income-tax Rules, 2026); the content of the rent disclosure is materially the same.
• Bank trail — pay rent by transfer where possible. Cash rent to a relative with no money trail is the pattern assessing officers disallow first.

Declare on time and the exemption flows through your monthly TDS; miss it and you claim in the return instead — legal, but slower cash-flow-wise, and first-time ITR-stage HRA claims attract e-verification notices often enough that you want the file complete before you claim.

If your pay structure has no HRA component at all — common in small firms and for the self-employed — Section 10(13A) is unavailable, but Section 80GG gives a smaller deduction for rent paid, old regime only. It is the least of:

• ₹5,000 per month (₹60,000 a year — ceiling raised by Finance Act 2016);
• 25% of adjusted total income; and
• rent paid minus 10% of adjusted total income.

Conditions: you must not have received HRA at any time in the year; you must file Form 10BA; and neither you, your spouse, your minor child nor your HUF may own a house at the place where you live and work — and you must not own residential property anywhere else that you claim as self-occupied. The income base is "adjusted total income", not salary — a different computation from Rule 2A, which is why this calculator deliberately does not fold 80GG into the HRA result. Treat the ₹60,000/year ceiling as the practical upper bound: for most people paying real city rent, 80GG is worth far less than a genuine HRA structure.

This page's engine is the marketing twin of a computation ReadyBooks runs in production. In ReadyBooks Payroll, each employee's rent declaration feeds the same Section 10(13A) three-limb minimum into the monthly Section 192 TDS projection — old regime only, exactly as the law works. Two implementation details matter and are easy to get wrong in ad-hoc spreadsheets:

• Pre-proration basic. The salary base uses the employee's full annual basic, not the loss-of-pay-reduced figure — so an LOP month lowers pay without accidentally inflating the exemption percentage limbs.
• Declared metro flag. The declaration captures whether the accommodation is in a 50% city as a yes/no answer, so the computation stays correct as the statutory city list changes — including the FY 2026-27 expansion to eight cities.

The result: payslips and Form 24Q that already reflect the exemption, with no February true-up shock. See payroll software for India for the full compliance surface (PF, ESI, PT, TDS), or start on the free plan.