How to Calculate HRA Exemption in India (With a Worked Example)
OnlineBillGenerator Editorial Team7 min readLast updated 1 Sept 2026
HRA exemption is the least of three amounts. This guide shows the exact formula, the metro versus non-metro rule, and a full worked example so you can calculate your own exemption.
Quick answer
Your HRA exemption under Section 10(13A) is the least of these three amounts: (1) the actual HRA you received, (2) 50% of your salary if you live in a metro city or 40% if you live in a non-metro city, and (3) the annual rent you paid minus 10% of your salary. For this calculation salary means basic pay plus dearness allowance (plus commission if it is a fixed percentage of turnover). Whichever of the three is smallest is the amount exempt from tax, and the rest of your HRA is taxable. HRA exemption applies only under the old tax regime, not the new regime.
The three-part rule
| # | Amount | How to work it out |
|---|---|---|
| 1 | Actual HRA received | The HRA figure on your salary slip for the year |
| 2 | 50% or 40% of salary | 50% of (basic + DA) for metro cities, 40% for non-metro |
| 3 | Rent minus 10% of salary | Annual rent paid minus 10% of (basic + DA) |
Worked example (metro city)
Take an employee in Mumbai (a metro) with a basic salary of Rs 40,000 per month, HRA of Rs 20,000 per month, paying rent of Rs 18,000 per month. Work each of the three amounts on a monthly basis:
| Amount | Calculation | Monthly value |
|---|---|---|
| Actual HRA received | As per salary slip | Rs 20,000 |
| 50% of salary (metro) | 50% of Rs 40,000 | Rs 20,000 |
| Rent minus 10% of salary | Rs 18,000 minus Rs 4,000 | Rs 14,000 |
The result
The exemption is the least of the three, which is Rs 14,000 per month, or Rs 1,68,000 for the year. Since the employee received Rs 20,000 per month in HRA, the taxable part of HRA is Rs 20,000 minus Rs 14,000, that is Rs 6,000 per month or Rs 72,000 for the year. For a non-metro city the only change is that step 2 uses 40% of salary instead of 50%, which can change which of the three amounts is smallest.
Documents you need to claim it
- Rent receipts for the period claimed, showing rent paid, landlord name and address.
- Your landlord's PAN if the total rent exceeds Rs 1,00,000 in the year.
- A rent agreement is useful supporting proof, though not always mandatory.
- Declare the exemption to your employer (Form 12BB) or claim it in your return.
Frequently asked questions
What is the HRA exemption formula?
HRA exemption is the least of: actual HRA received, 50% of salary for metro or 40% for non-metro, and annual rent paid minus 10% of salary. Salary means basic plus DA.
Which cities count as metro for HRA?
For HRA, the metro cities are Delhi, Mumbai, Kolkata and Chennai, which qualify for the 50% rate. All other cities use the 40% non-metro rate.
Is HRA exemption available in the new tax regime?
No. The HRA exemption under Section 10(13A) is available only under the old tax regime. If you opt for the new regime you cannot claim it.
Do I need my landlord's PAN?
Yes, if the total rent you pay in a financial year exceeds Rs 1,00,000, you must report your landlord's PAN to claim the exemption.
Can I claim HRA if I pay rent to my parents?
Yes, if you genuinely pay rent to a parent who owns the home, with proof of payment and rent receipts. The parent must report the rent as income.
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Written and maintained by the OnlineBillGenerator editorial team. Formats and tax figures are checked against official Indian sources (the GST portal / CBIC and the Income Tax Department) and reviewed periodically. This is general information for record-keeping, not professional tax advice.