What is HRA Exemption?
HRA (House Rent Allowance) exemption under Section 10(13A) allows salaried employees to reduce taxable income by the HRA they receive — subject to certain limits. The exemption is only available under the old tax regime.
The exemption is the minimum of three amounts: (1) Actual HRA received, (2) 50% of basic salary for metro cities or 40% for non-metro, (3) Actual rent paid minus 10% of basic salary.
HRA exemption is only available under the old tax regime. Under the new regime, full HRA is taxable — making HRA a key reason some employees prefer the old regime.
How is HRA Exemption Calculated?
Metro vs Non-Metro
Metro cities (Mumbai, Delhi, Kolkata, Chennai): 50% of basic salary. All other cities: 40% of basic salary. This is one of the few tax rules where city classification directly affects your tax bill.
Example — ₹50,000 basic, ₹25,000 HRA, ₹20,000 rent, Metro
(1) HRA received: ₹25,000. (2) 50% of basic: ₹25,000. (3) Rent − 10% of basic: ₹20,000 − ₹5,000 = ₹15,000. Exemption = Min(25,000, 25,000, 15,000) = ₹15,000/month.
Example Calculation
Frequently Asked Questions
HRA exemption is the minimum of three amounts: (1) actual HRA received from employer, (2) 50% of basic salary for metro cities or 40% for non-metro, (3) actual rent paid minus 10% of basic salary. The lowest of these three is your tax-free HRA.
No. HRA exemption under Section 10(13A) is only available under the old tax regime. Under the new regime, full HRA received is included in taxable income. This is a key reason to compare both regimes — if your HRA exemption is large, old regime may save more tax.
Only four cities qualify as metro for HRA: Mumbai, Delhi, Kolkata, and Chennai. All other cities — including Bengaluru, Hyderabad, Pune, Ahmedabad — are classified as non-metro for HRA purposes, getting 40% of basic instead of 50%.
For rent up to ₹1 lakh/year (₹8,333/month), no receipts are required — just a declaration. For rent above ₹1 lakh/year, you must submit rent receipts and landlord's PAN to your employer for TDS computation.
You can only claim exemption up to the HRA amount received from your employer — paying more rent than HRA doesn't increase exemption beyond what's received. However, excess rent above 10% of basic is counted in calculation 3, so higher rent does help if HRA received is the binding constraint.
Related Calculators
Disclaimer: Results are for informational and educational purposes only — not financial, tax, or legal advice. Tax slabs, rates (EPF, PPF, home loan), and rules shown are based on data available in 2025 and may change. Always verify with a qualified professional or official government sources before making financial decisions.