HRA Calculator

How HRA Exemption Works

House Rent Allowance appears in full on your payslip, but only part of it is tax-free. The Income Tax Act, under Section 10(13A), sets the exempt amount as the lowest of three separate calculations — so the relief is proportionate to what you actually pay in rent and what you earn. Enter your monthly basic salary, HRA received, rent paid, and whether you live in a metro city. The calculator evaluates all three conditions and shows your exempt HRA, taxable HRA, and annual tax saving instantly.

One thing to be clear about upfront: this exemption exists only under the old tax regime. Under the new regime (Section 115BAC, default from FY 2023-24), HRA exemption is not available regardless of how much rent you pay. If HRA is a significant deduction for you, compare both regimes before choosing. Our Income Tax Calculator does that comparison in seconds.

Results here are estimates based on constant monthly values. If your salary or rent changes during the year, or if you move cities, calculate each period separately. Your Form 16 from your employer is the authoritative document for ITR filing.

HRA Exemption Formula

HRA exemption under Section 10(13A) is calculated as the minimum (lowest) of the following three amounts:

The rationale behind this three-part test is straightforward. Condition (a) ensures you cannot claim more than what your employer actually pays you as HRA. Condition (b) sets a ceiling based on the cost of living in your city — metro cities get a higher cap because rents tend to be higher. Condition (c) accounts for the fact that a small portion of your salary is expected to go toward housing regardless, so only the rent above 10% of your basic salary qualifies for relief.

Whichever of these three amounts is the lowest becomes your tax-exempt HRA. The remaining HRA (total HRA received minus the exempt portion) is your taxable HRA, which gets added to your gross income for tax computation purposes. The calculator evaluates all three conditions automatically — the formula is shown here for transparency and to help you verify the figure in your Form 16.

Example Calculation

In this example, even though the employer pays ₹20,000 as HRA, only ₹13,000 is tax-free. The remaining ₹7,000 per month (₹84,000 per year) gets added to taxable income. Thus, if this employee falls in the 30% income tax slab under the old regime, the ₹13,000 monthly exemption saves approximately ₹48,360 per year in taxes — calculated as ₹13,000 × 12 months × 31.2% (30% tax + 4% cess).

Metro vs Non-Metro HRA Rules

The Income Tax Act classifies exactly four cities as metro cities for HRA purposes: Delhi, Mumbai, Kolkata, and Chennai. All other cities and towns in India — including Bengaluru, Hyderabad, Pune, Ahmedabad, and Noida — are classified as non-metro. This classification affects only condition (b) of the three-part test; conditions (a) and (c) remain identical regardless of location.

Note that cities such as Bengaluru, Hyderabad, and Pune are not classified as metro under the Income Tax Act for HRA purposes, even though they have comparable rental costs. Thus, employees paying high rents in these cities receive the lower 40% cap. If you relocated during the financial year, calculate HRA exemption separately for the months spent in each city, using the applicable metro or non-metro percentage for that period. Your employer handles this in Form 16 based on the declarations you submit.

What Your HRA Exemption Amount Means

The exempt HRA figure from this calculator directly reduces your gross taxable income for the year. The actual rupee saving depends on your income tax slab under the old regime. The table below shows annual tax savings at the two most common slab rates for a range of monthly exempt HRA amounts:

These savings apply under the old tax regime only. Under the new regime, HRA exemption is not available — however, the new regime offers lower flat slab rates, which may still result in a lower total tax bill depending on your income level and other deductions. For a complete comparison of which regime saves more tax for your specific situation, use our Income Tax Calculator. Note that these figures assume no mid-year salary or rent changes; for personalised tax advice, consult a qualified chartered accountant.

The Four-City Rule That Surprises Most Salaried Employees

Only four cities qualify as "metro" under the Income Tax Act for HRA purposes: Delhi, Mumbai, Kolkata, and Chennai. That classification was written into the law decades ago and has not been updated since. Bengaluru, Hyderabad, and Pune — cities where median rents now rival or exceed Chennai — are still treated as non-metro. So employees there receive a 40% cap on basic salary under condition (b) instead of 50%.

The difference is real money. On a basic salary of ₹60,000/month, the non-metro cap is ₹24,000 versus the metro cap of ₹30,000. If condition (b) is the binding constraint for you, that ₹6,000/month gap means ₹72,000/year more taxable income. At the 30% slab, that costs ₹22,464 extra in tax annually. At the 20% slab, ₹14,976.

There is no workaround for this. If your employer's registered office is in a metro and you work remotely from Bengaluru, the city you actually live and pay rent in determines the classification, not where your employer is based. The exemption applies to where you reside.

Note: this table shows the impact only when condition (b) is the lowest of the three. If your actual rent minus 10% of basic is lower than both, the metro/non-metro difference may not be the binding constraint for your specific case. Use the calculator above with your real figures to confirm which condition limits your exemption.

Paying Rent to Your Parents: Legal, Effective, and Often Misunderstood

If you live in a house owned by your parents and pay them rent, you can claim HRA exemption on that rent payment. This is a well-established and entirely legal tax planning strategy. The conditions are specific, and getting them wrong creates tax problems for both you and your parents.

The rules: The rent must be genuine — a real transfer of money, not a paper entry. Your parents must declare the rent as income from house property in their own income tax return. You need proper rent receipts and ideally a registered rental agreement. You cannot pay rent to your spouse and claim HRA; the law disallows it specifically.

Why it works: If your parents are in a lower tax bracket (or have no other income and fall below the basic exemption limit of ₹3 lakh under the old regime), the tax they pay on rental income is lower than the tax you save on HRA exemption. The net family tax outgo goes down. For a person in the 30% slab paying ₹20,000/month rent to a parent with no other income, the annual family tax saving can be ₹50,000 or more.

What triggers scrutiny: Very high rent amounts relative to market rates for the property, rent paid in cash without bank transfer records, or parents not declaring the income. Pay by bank transfer every month. Keep the rent at or below market rate for similar properties in the area. Make sure your parents file ITR and include the rental income.

If your annual rent exceeds ₹1,00,000 (₹8,333/month), you must also provide your parents' PAN to your employer as the landlord's PAN. This is mandatory under the Income Tax Rules, regardless of whether they are your parents or an unrelated landlord.

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