HRA Calculator

The exemption is the least of three amounts

Under section 10(13A) of the Indian Income Tax Act, the exempt portion of House Rent Allowance is the smallest of three figures: the actual HRA received; rent paid minus 10 percent of salary; and 50 percent of salary for metro cities or 40 percent elsewhere. Whichever is lowest is exempt, and the remainder is taxable. People routinely assume the whole allowance is exempt, which it almost never is.

What salary means here

Salary for this calculation is basic pay plus dearness allowance, plus any commission based on a fixed percentage of turnover. It excludes other allowances, perquisites and bonuses. Using gross salary instead inflates the 10 percent deduction and the 40 or 50 percent cap, producing a wrong answer in both directions.

Metro definition is narrow

Only Delhi, Mumbai, Kolkata and Chennai count as metros for the 50 percent limit. Bengaluru, Hyderabad, Pune and every other city take 40 percent, regardless of cost of living or population. This surprises people in expensive non-metro cities, but the list is fixed in the statute rather than assessed by conditions.

Documentation

Rent receipts are required, and where annual rent exceeds 1,00,000 the landlord's PAN must be reported to the employer. Rent paid to a parent is permitted provided the arrangement is genuine: the parent must actually own the property, rent must actually be transferred, and the parent must declare it as income. Paying a spouse is generally challenged.

Only under the old regime

HRA exemption is available under the old tax regime only. The new regime removes it along with most other deductions in exchange for lower slab rates. If you have substantial HRA, rent and other deductions, the old regime often remains better, but that comparison has to be run on your own numbers rather than assumed either way.

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