HRA Exemption. Step by Step.
Most salaried employees have HRA in their salary slip but calculate the exemption wrong. Here is the exact 3-part formula with worked examples for every salary range.
3-Part Formula
The minimum rule
50% / 40%
Metro vs non-metro
Section 10(13A)
Applicable section
Old Regime Only
Not in new regime
New Tax Regime users: HRA exemption under Section 10(13A) is not available if you have opted for the New Tax Regime. This guide applies only to Old Regime taxpayers.
The HRA Formula
HRA exemption is governed by Section 10(13A) of the Income Tax Act. The exemption is the minimum (lowest) of these three values:
HRA Exempt = MIN of these 3
Actual HRA received from employer
As per your salary slip
50% of Basic Salary (metro) OR 40% of Basic Salary (non-metro)
Metro = Mumbai, Delhi, Kolkata, Chennai
Actual Rent Paid − 10% of Basic Salary
Annual figures for all three
All figures are calculated on an annual basis. Use monthly figures × 12 if your salary slip shows monthly amounts.
Worked Examples — 3 Salary Ranges
Example 1: ₹40,000/month Basic Salary — Delhi (Metro)
Inputs
Calculation
Minimum = Part C = ₹1,32,000 exempt
Despite paying ₹1.8L in rent, only ₹1.32L is exempt because Part C is the lowest of the three.
Example 2: ₹60,000/month Basic Salary — Pune (Non-Metro)
Inputs
Calculation
Minimum = Part C = ₹1,68,000 exempt
Part B and Part A are equal here. Part C is still the limiting factor. To get more exemption, increase rent paid.
Example 3: ₹1,00,000/month Basic Salary — Mumbai (Metro)
Inputs
Calculation
Minimum = Part C = ₹4,20,000 exempt
At higher salaries the 10% of basic deduction in Part C becomes large (₹1.2L here), significantly reducing the exemption. The employer should structure a higher HRA component to maximise benefit.
Common Mistakes
Claiming HRA without actual rent receipts
You must have physical or digital rent receipts signed by the landlord. If audited, the ITR department can disallow the exemption without proof.
Not getting landlord PAN for rent above ₹1 lakh/year
If annual rent exceeds ₹1,00,000, you must submit the landlord's PAN card copy to your employer. Without this, TDS is deducted on the excess.
Calculating on monthly instead of annual figures
All three parts of the formula use annual figures. Always multiply monthly amounts by 12 before applying the minimum rule.
Claiming HRA for the same address as your own property
You cannot claim HRA if you own and live in the same city. If you own a house but live in a rented accommodation (e.g., rented closer to office), you can claim — with proper documentation.
Not declaring HRA to employer — claiming only at ITR
If you miss the employer declaration deadline, TDS is deducted in excess. You can still claim at ITR filing — but you will wait for refund. Declare on time.
HRA Exemption FAQ
Can I pay rent to my parents and claim HRA? ▾
Yes — this is 100% legal. Make payments via bank transfer, have a rental agreement, and ensure your parents declare rent income in their ITR. Their income from rent is often taxed at a lower rate than yours.
What if my employer does not give HRA but I pay rent? ▾
If you are self-employed or your employer does not provide HRA, you can claim Section 80GG deduction (not HRA exemption). 80GG allows up to ₹5,000/month or 25% of total income — whichever is lower.
Is HRA exempt under the New Tax Regime? ▾
No. HRA exemption under Section 10(13A) is not available in the New Tax Regime. This is one of the major losses when switching from Old to New Regime.
What are metro cities for HRA purposes? ▾
Only four cities qualify as metros for HRA: Mumbai, Delhi, Kolkata, and Chennai. All other cities including Bangalore, Hyderabad, Pune, Ahmedabad are non-metros and get 40% of basic instead of 50%.
Calculate Your HRA
Use our calculators to find your exact exemption
Tax Disclaimer: Based on Finance Act 2025. Consult a CA for personalised advice. © 2026 HQCalc.