HRA Calculator

What is HRA exemption?

House Rent Allowance (HRA) is a salary component paid to cover the cost of rented accommodation. Under Section 10(13A) of the Income Tax Act, a part of the HRA you receive is exempt from income tax if you actually live in rented accommodation and pay rent. The exemption is not the full HRA and it is not a flat percentage. Instead, it is calculated with a specific formula, and only the exempt portion is removed from your taxable salary. This exemption is available only if you opt for the old tax regime. If you choose the new tax regime, you cannot claim HRA exemption at all.

How is HRA exemption calculated?

Your HRA exemption is the least of these three amounts:

1. The actual HRA received from your employer during the year.
2. 50% of salary if you live in a metro city, or 40% of salary if you live in a non-metro city.
3. The rent you paid minus 10% of salary.

For this formula, "salary" means basic pay plus dearness allowance (DA), plus commission if it is a fixed percentage of turnover. Whichever of the three amounts is smallest is your exempt HRA. The remaining HRA is added back to your taxable income. The calculator above works out all three figures instantly as you type, so you can see which one is capping your exemption.

Metro vs non-metro cities

The only four cities treated as metro for HRA are Delhi, Mumbai, Kolkata and Chennai, which use the 50% rate. Every other city, including Bengaluru, Hyderabad, Pune and Gurugram, uses the 40% non-metro rate. Living in a metro can raise the second cap in the formula, which sometimes increases your exemption.

Worked example

Take an employee in Mumbai with a basic salary of Rs 40,000 per month, HRA of Rs 20,000 per month, and rent of Rs 18,000 per month. The three amounts work out as follows: actual HRA is Rs 20,000, 50% of salary is Rs 20,000, and rent minus 10% of salary is Rs 18,000 minus Rs 4,000, which is Rs 14,000. The least of the three is Rs 14,000 per month exempt (Rs 1,68,000 for the year), and the remaining Rs 6,000 per month of HRA is taxable. See the full step-by-step in the worked HRA example guide.

Documents you need to claim HRA

• Rent receipts for the months claimed, showing the rent paid, and the landlord's name and address.
• Your landlord's PAN if the total rent for the year is above Rs 1,00,000.
• A rent agreement as supporting proof, which is useful though not always mandatory.
• A declaration to your employer through Form 12BB, or claim the exemption directly in your income tax return.

Once you know your exemption, generate a rent receipt for each month, and read the full HRA claim guide for the rules on landlord PAN, paying rent to parents, and Form 12BB. To see how HRA fits into your overall pay, use the salary calculator to break your CTC into monthly in-hand.

Common mistakes to avoid

• Assuming the whole HRA is exempt. Only the least of the three amounts is exempt.
• Using gross salary instead of basic plus DA in the formula.
• Forgetting the landlord's PAN when rent crosses Rs 1,00,000 a year.
• Claiming HRA under the new tax regime, where it is not allowed.

Frequently asked questions

This is general information, not tax advice. Verify figures against current Income Tax Department rules.