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Salary exemption

India HRA Exemption Calculator

All three statutory limits are computed together so you can see which one binds, what rent would maximise the exemption, and how much tax it actually saves. Available under the old regime only.

Statutory rates as of 1 Apr 2026

Inputs

Direction

Start from the rent if it is already fixed, or from a target exemption to work the rent backwards.

Salary

Enter monthly figures; the calculation is annualised.

The base for both percentage limits.

The HRA line on the payslip

Housing

Rent actually paid, and where you live.

Only rent genuinely paid qualifies.

Location

50%: Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad, Bengaluru. Everywhere else 40%.

Tax rate

Your old-regime marginal rate, used for the saving figure.

A 4% cess is added on top.

Understanding the Indian HRA exemption

House Rent Allowance is usually the second largest line on an Indian payslip, but receiving it does not make it exempt. Only the smallest of three statutory limits escapes tax, and choosing the new regime removes the exemption altogether. From Tax Year 2026-27 the rule sits in the Income-tax Act, 2025 and the Income-tax Rules, 2026, and the 50% rate covers eight cities instead of four. Here is what matters when designing a salary structure or reviewing an expatriate's tax position.

An allowance that is exempt only on conditions

HRA is paid as compensation for housing costs. As salary it is taxable in principle, but Schedule III Table Sl.11 of the Income-tax Act, 2025 (formerly s.10(13A)), read with Rule 279 of the Income-tax Rules, 2026 (formerly Rule 2A), exempts part of it where the employee genuinely pays rent and lives in the rented accommodation. The three-limit formula itself carried over unchanged into the new Act.

Living in a self-owned home, or paying no rent, makes the whole allowance taxable — including staying rent-free with parents. Conversely, rent genuinely paid to a parent does qualify.

Indian salary structures typically set Basic at 40–50% of CTC and HRA at 40–50% of Basic, precisely because of this exemption. The labour codes' 50% wage requirement now forces many of those structures to be redesigned.

Three limits, and the least of them

The exemption is the smallest of: the HRA actually received; 50% of Basic in a metro or 40% elsewhere; and rent actually paid less 10% of Basic.

In practice the third limit usually binds. Where rent is low, no amount of HRA increases the exemption. Where rent is high, one of the first two limits caps it and further rent achieves nothing.

That turning point is the optimal rent this calculator reports: min(HRA received, city share × Basic) plus 10% of Basic. Note that a figure being advantageous does not make it declarable — the department reconciles bank transfers against the landlord's declared income.

Eight 50% cities from Tax Year 2026-27

From Tax Year 2026-27 — the year that began on 1 April 2026 — the second limit is 50% of Basic where the rented home is in Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad or Bengaluru (Schedule III Table Sl.11 read with Rule 279). Everywhere else it is 40%.

This is a change in the law, not a new reading of it. Up to FY 2025-26 the old Rule 2A named only Delhi, Mumbai, Kolkata and Chennai, so Bengaluru, Hyderabad, Pune and Ahmedabad were 40% cities. Payroll still running on the four-city list can understate the exemption for people living in those four cities, while FY 2025-26 figures — that year's Form 16 and the return for AY 2026-27 — correctly stay on the old list.

The list is closed. Gurugram and Noida remain 40% cities even though they adjoin Delhi. What matters is where you live, not where the office is: working in Delhi while living in Gurugram attracts 40%. If you move mid-year, the calculation is split across the periods.

The new regime removes the exemption

The new regime — introduced in 2020 as s.115BAC and carried into the Income-tax Act, 2025 as s.202 — lowers the slab rates but withdraws most exemptions and deductions. HRA is the largest casualty: however much rent is paid, the allowance is fully taxable.

Critically, the new regime is the default. An employee who declares nothing is withheld under it. Opting for the old regime requires an express declaration to the employer at the start of the financial year.

So even a large HRA exemption has to be tested against the alternative. HRA, s.123 (formerly s.80C) and housing loan interest combined often fail to beat the new regime's lower rates and ₹75,000 standard deduction. The one meaningful shelter surviving in the new regime is the employer's NPS contribution under s.124(2) (formerly s.80CCD(2)).

Evidence — PAN and tenant withholding

Where annual rent exceeds ₹1,00,000, the landlord's PAN must be reported to the employer. If the landlord has none, a signed declaration with Form 97 (formerly Form 60) is accepted. Without either, the employer withholds tax on the full allowance.

Above ₹50,000 of monthly rent a second obligation arises: the tenant must withhold 2% under the s.393(1) Table of the Income-tax Act, 2025 (formerly s.194-IB), deposit it once at year end or when the tenancy ends, and file Form 141 (formerly Form 26QC). Individuals are covered and no TAN is required. Missing it attracts interest and a late fee.

Declare the expected rent to the employer on Form 124 (formerly Form 12BB) at the start of the year and produce receipts and the lease at year end. Failing to substantiate leaves the whole year's tax to be recovered from January and February salary.

Situations that come up often

Rent paid to a parent qualifies, provided it is real: a lease, bank transfers, and the parent declaring the rental income. Where the parent's marginal rate is lower, the family saves overall. Rent paid to a spouse is generally not accepted.

Housing loan interest relief and HRA can be claimed together where there is a genuine reason to rent — the owned property is in another city, or too far to commute from.

Someone paying rent but receiving no HRA can claim under s.134 (formerly s.80GG) instead, capped at ₹60,000 a year, which is far smaller and again available only under the old regime.

Where the employer leases an apartment directly for an expatriate, the benefit is a perquisite valued under Rule 15 of the Income-tax Rules, 2026 (formerly Rule 3), not HRA at all. The two sets of rules are entirely separate and should not be confused when structuring an assignment package.

Year-end evidence checklist

  • Form 124 (formerly Form 12BB) filed with expected rent at the start of the year
  • Lease agreement and rent receipts collected
  • Landlord PAN obtained where annual rent exceeds ₹1,00,000
  • 2% withheld and Form 141 (formerly Form 26QC) filed where monthly rent exceeds ₹50,000
  • Right city rate applied — eight 50% cities from Tax Year 2026-27, four up to FY 2025-26
  • Old and new regime compared before the declaration was made
  • Periods split correctly if you moved home during the year

Legal basis

  • Income-tax Act, 2025, Schedule III Table Sl.11 (formerly s.10(13A) of the Income-tax Act, 1961) — house rent allowance exemption
  • Income-tax Rules, 2026, Rule 279 (formerly Rule 2A) — the three limits and the eight 50% cities from Tax Year 2026-27
  • Income-tax Rules, 1962, Rule 2A — the four-city list that applies up to FY 2025-26
  • Income-tax Act, 2025, s.202 (formerly s.115BAC) — exemptions withdrawn under the new regime
  • Income-tax Rules, 2026, Rule 205 and Form 124 (formerly Rule 26C and Form 12BB) — evidence of rent, including landlord PAN above ₹1,00,000 a year (first required by CBDT Circular 8/2013)
  • Income-tax Act, 2025, s.393(1) Table (formerly s.194-IB) — 2% tenant withholding above ₹50,000 monthly rent, reported on Form 141 (formerly Form 26QC)
  • Income-tax Act, 2025, s.134 (formerly s.80GG) — rent relief where no HRA is received

Frequently asked questions

No. The new regime — s.202 of the Income-tax Act, 2025 (formerly s.115BAC) — trades lower rates for the withdrawal of HRA, LTA, the s.123 (formerly s.80C) and s.126 (formerly s.80D) deductions and self-occupied housing interest. To claim HRA you must expressly opt for the old regime with your employer at the start of the financial year; declaring nothing leaves you on the new regime by default.

Switch 'Direction' at the top of the calculator to 'From a target', enter the annual exemption you want, and the rent required appears immediately. Rent only moves one of the three limbs — (c) rent paid minus 10% of Basic — so the required rent works out to the target plus 10% of Basic. The other two limbs cannot be crossed with rent: (a) the HRA actually received, and (b) 50% of Basic + DA in the metros, 40% elsewhere. If the target sits above the lower of those two, the calculator names which limb is blocking and what the ceiling is, because the fix then belongs in the salary structure rather than the rent.

From Tax Year 2026-27, yes. Rule 279 of the Income-tax Rules, 2026, read with Schedule III Table Sl.11 of the Income-tax Act, 2025, gives the 50% rate to Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru. Up to FY 2025-26 the old Rule 2A named only Delhi, Mumbai, Kolkata and Chennai, so Bengaluru, Hyderabad, Pune and Ahmedabad were at 40% of Basic. Gurugram and Noida remain at 40%.

Above ₹1,00,000 of annual rent the PAN is mandatory. If the landlord genuinely has none, a signed declaration with name and address plus Form 97 (formerly Form 60) can be submitted instead. With nothing at all the employer will refuse the exemption and withhold tax, though you can still claim it in your own return if the rent was genuinely paid.

Yes, if it is real. Put a lease in place, pay by bank transfer, and have the parent declare the rental income. Where the parent's rate is lower than yours the family gains overall. Rent paid to a spouse is generally not accepted.

You can claim the exemption directly in your income tax return and obtain a refund, even if it is absent from your salary TDS certificate — Form 130 (formerly Form 16; the old Form 16 still covers FY 2025-26) — provided you have the lease and payment evidence. Claims made outside the certificate attract more scrutiny, so keep the documentation complete.

Only up to a point. Once rent less 10% of Basic reaches the smaller of the other two limits, the exemption stops growing. The optimal-rent card shows where that happens; rent above it has no tax effect at all.

Section 134 of the Income-tax Act, 2025 (formerly s.80GG) allows the least of rent paid less 10% of total income, 25% of total income, and ₹5,000 a month (₹60,000 a year). It is unavailable if you or your spouse own a house at the work location, and like HRA it exists only in the old regime.

Yes, where there is a genuine reason to rent — the owned property is in a different city, or too far to commute from. If the owned property is let out, that rental income must also be declared. Both reliefs sit in the old regime only.

Then it is not HRA at all but a perquisite, valued under Rule 15 of the Income-tax Rules, 2026 (formerly Rule 3) and added to salary income. The rules are entirely different, so do not mix the two. Which structure is better for an assignment package needs a case-by-case review.

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Annual exemption₹2,04,000