HRA Exemption Calculator: find your exact exempt amount — and the lever that raises it
Last reviewed: 25 September 2026. First, the rule that decides everything: HRA exemption exists only in the old regime. Under the new (default) regime the entire allowance is taxable — so this calculator is really two decisions in one: how much of your HRA escapes tax, and whether that saving is large enough to make the old regime worth choosing at all. 2026 also brought the first real change to the metro rules in years — from FY 2026-27, eight cities qualify for the 50% limit, with Bengaluru, Hyderabad, Pune and Ahmedabad joining the original four.
Compute your exempt HRA — and see which limb is holding it down
"Salary" here means basic + DA (where it forms part of retirement benefits) + turnover-linked commission. Indicative computation — confirm before filing.
Worked example — how the least-of-three plays out
Basic + DA ₹8,00,000; HRA received ₹3,20,000; rent paid ₹3,00,000 in Mumbai (metro):
| Limb | Computation | Amount |
|---|---|---|
| (a) HRA received | As per salary structure | ₹3,20,000 |
| (b) Rent − 10% of salary | ₹3,00,000 − ₹80,000 | ₹2,20,000 ← least |
| (c) 50% of salary (metro) | 50% × ₹8,00,000 | ₹4,00,000 |
Exempt HRA is ₹2,20,000; the remaining ₹1,00,000 of HRA stays taxable. The binding limb here is rent — which is exactly the lever: every extra rupee of genuine, documented rent (up to the point another limb takes over) adds a rupee of exemption.
Which cities count as metro?
| Period | 50% (metro) cities |
|---|---|
| AY 2026-27 return (income year 2025-26) | Delhi, Mumbai, Kolkata, Chennai |
| From FY 2026-27 (Income-tax Rules, 2026) | Delhi, Mumbai, Kolkata, Chennai + Bengaluru, Hyderabad, Pune, Ahmedabad |
Everywhere else — including Thane, Navi Mumbai and Gurgaon — remains at 40%. For FY 2025-26 (the AY 2026-27 return) the exemption comes from section 10(13A) of the 1961 Act read with Rule 2A of the Income-tax Rules, 1962. From tax year 2026-27 it sits in Schedule III (Table S.No. 11) read with section 11 of the Income-tax Act, 2025, and the computation and the eight-city list move to the Income-tax Rules, 2026 notified in March 2026. Check the rule number in the notified text before quoting it in a filing.
The levers that legitimately raise your exemption
- Pay rent you can prove. Receipts, a rent agreement, and bank transfers — cash trails collapse in scrutiny. Landlord PAN is needed once rent crosses ₹1 lakh a year.
- Family-rent arrangements work only when real. Paying a parent rent is accepted where the money actually moves and the parent offers it as income in their return. Rent to a spouse is litigation-prone — avoid it.
- Watch the rent-TDS trigger. Monthly rent above ₹50,000 means you must deduct 2% TDS: Section 194-IB with Form 26QC for rent paid in FY 2025-26, and section 393(1), Table S.No. 2(i) of the 2025 Act with the common challan-cum-statement Form 141 for rent paid from 1 April 2026 — our TDS-on-rent guide walks through it.
- HRA and home-loan interest can coexist where the facts support it — owning in one city while renting in another for work is the classic case. Keep the evidence of why.
- HRA-light salary structure? If the 50/40% limb is far above what you receive, there is headroom — worth raising at your next compensation review.
If your landlord is an NRI
The 2% rent TDS applies only to resident landlords. When the owner of your flat lives abroad, rent is paid to a non-resident and TDS falls under section 195 (section 393(2) of the 2025 Act from 1 April 2026). TDS is generally 30% plus surcharge and cess on every payment, with no ₹50,000 threshold. You need a TAN and must file the quarterly non-resident TDS statement (Form 27Q, now Form 144). The landlord can cut the rate by obtaining a lower-deduction certificate. Your HRA claim is unaffected, but the tenant who deducts 2% instead of 30% is the one left with the shortfall and interest. For NRI owners, our CA for NRIs service handles the certificate and the landlord's Indian return.
Keep reading
- HRA in 2026: the full metro-cities rule change, with payslip-level examples
- TDS on rent: 194-I vs 194-IB rates, limits and Form 26QC
- Old vs new regime: break-even guide with worked examples
- Advance Tax Calculator: instalments and 234B/234C interest
- ITR filing hub AY 2026-27: forms, regimes and deadlines
- NRI Tax Hub: ITR, property, TDS and remittances
Frequently asked questions
Is HRA exempt under the new tax regime?
No. HRA exemption is available only in the old regime. The new (default) regime taxes the entire allowance but applies lower slab rates — high rent in a metro city is one of the few situations where the old regime still wins, so compare both on your actual numbers.
Which cities count as metro for the 50% limit?
For the AY 2026-27 return (income year 2025-26): Delhi, Mumbai, Kolkata and Chennai. From FY 2026-27, the Income-tax Rules, 2026 extend the 50% limit to eight cities — adding Bengaluru, Hyderabad, Pune and Ahmedabad. All other cities, including Thane and Navi Mumbai, use 40%.
What does "salary" mean in the HRA formula?
Basic salary plus dearness allowance (where it forms part of retirement benefits) plus commission as a fixed percentage of turnover. Other allowances and perquisites are excluded — so the 50/40% and 10%-of-salary limbs are computed on a narrower base than your CTC.
Can I pay rent to my parents and claim HRA?
Yes, where the arrangement is genuine: the money actually moves to the parent, ideally by bank transfer, and the parent offers the rent as income in their return. Rent paid to a spouse is litigation-prone — steer clear of it. Disclose family-landlord arrangements accurately if the ITR utility asks.
When do I need the landlord’s PAN, and when does TDS apply on my rent?
Your employer needs the landlord’s PAN once rent exceeds ₹1 lakh a year. Separately, if your monthly rent exceeds ₹50,000, you must deduct TDS at 2% as the tenant, even as a salaried individual. For rent paid up to 31 March 2026 that is Section 194-IB with Form 26QC; for rent paid from 1 April 2026 it is section 393(1), Table S.No. 2(i) of the Income-tax Act, 2025, reported in the common challan-cum-statement Form 141.
Can I claim both HRA and home-loan deductions?
Yes, where the facts support it — the classic case is owning a house in one city (claiming the interest deduction) while living on rent in another city for work. Keep evidence of the work reason and both money trails; claiming both for the same city and period invites questions.
My landlord is an NRI. Does the 2% rent TDS apply?
No. The 2% rule (194-IB, now section 393(1) Table S.No. 2(i)) covers resident landlords only. Rent paid to a non-resident landlord falls under section 195 (section 393(2) from 1 April 2026): TDS is generally 30% plus surcharge and cess on each payment, with no Rs 50,000 threshold, and the tenant needs a TAN and files the non-resident TDS statement (Form 27Q, now Form 144). The landlord can apply for a lower-deduction certificate.
We compare both regimes on your actual numbers, paper the rent trail correctly, and file — one workflow, with a review of the supporting documents.
Income Tax FilingTDS Return FilingTalk to usGeneral guidance based on the metro-list and HRA rules as covered in our 2026 guides, reviewed on 25 September 2026. HRA exemption applies in the old regime only; computations are indicative — confirm your regime choice and figures with us before filing.