HRA exemption calculator

What this tool is for

It works out how much of your house rent allowance is tax-free. The law gives you the smallest of three amounts, and this shows all three side by side, so you can see which one is holding you back and whether paying more rent would help at all.

Who it's for: salaried people filing under the old regime; anyone renting in a city that is not one of the four the 50% rule names; and people who get no HRA at all, who may be able to claim under section 80GG instead.

The rule, in one line

House rent allowance is not tax-free because it is called HRA. It is tax-free up to the smallest of three amounts, and which one bites tells you what to do about it. If the HRA you receive is the smallest, your rent is already doing all it can. If rent above 10% of pay is the smallest, paying more rent would free more HRA. If the 50% or 40% cap is the smallest, nothing you do with rent will help, because the law has stopped you.

Why Bengaluru is not a metro

The 50% limit names four cities: Delhi, Mumbai, Kolkata and Chennai. That list was written when they were the four largest cities in India, and it has never been changed. Bengaluru, Hyderabad, Pune, Gurugram and Noida are all capped at 40% of basic, however expensive their rent has become. It is the single most common mistake in HRA claims, and the reason a Bengaluru tenant often cannot use their whole HRA.

The 10% floor catches people out

Rent is only counted above 10% of your basic and DA. On a ₹40,000 basic that is ₹4,000 a month — so rent of ₹3,000 gives nothing at all, and rent of ₹6,000 gives only ₹2,000 a month towards the exemption. People sharing a flat, or paying rent to a parent, are often below the floor without realising it.

Kavitha's year in Chennai

Kavitha earns ₹50,000 of basic in Chennai with ₹25,000 of HRA and pays ₹30,000 of rent. Chennai is a metro, so her cap is 50% of ₹6,00,000 = ₹3,00,000. Her rent above 10% of salary is also ₹3,00,000, and her HRA for the year is ₹3,00,000. All three are equal, so her whole HRA is tax-free — the best case the rule allows.

Her colleague in Coimbatore, on the same salary and rent, is capped at 40% — ₹2,40,000 — so ₹60,000 of his HRA stays taxable. Same pay, same rent, different city, ₹60,000 of difference.

What to keep, and when to tell your employer

Rent receipts for every month claimed, and the rent agreement. Once your rent passes ₹1 lakh a year your employer must have your landlord's PAN before they can allow the exemption in your TDS — that has been the rule since a CBDT circular in 2013. Declare the rent before your company's investment-proof cut-off, usually in December or January; otherwise tax is deducted anyway and you have to claim it back in your return.

Rent paid to your parents

It is allowed, and it is not a trick as long as it is real. The home must be owned by them and not by you, money must actually move each month, and your parents must show that rent as income in their own return. Pay by bank transfer, not cash, and keep a simple agreement.

If you get no HRA at all

Section 80GG exists for exactly that: the self-employed, and salaried people whose package has no HRA line. The deduction is the smallest of rent above 10% of total income, 25% of total income, and ₹5,000 a month — so it is capped at ₹60,000 a year however high your rent is. You file Form 10BA, and you must not own a home in the place you live or work.

The part most articles leave out

All of this only exists in the old tax regime. The new regime, which is the default, ignores HRA completely. So the real question is not "how much HRA is exempt" but "is my exemption big enough to beat the new regime's lower rates". Turn on the regime check, put in your yearly salary, and read the comparison — for most salaries the new regime still wins unless the rent is large and 80C is full.