HRA Exemption: How to Calculate & Claim (2026)

House Rent Allowance (HRA) is one of the most effective tax-saving components in a salaried individual’s CTC in India. Defined under Section 10(13A) of the Income Tax Act, 1961, read with Rule 2A of the Income Tax Rules, HRA allows employees living in rented accommodation to claim partial or full exemption from income tax.

If you are trying to figure out how to calculate HRA exemption, determine how much HRA is tax free, or check is HRA available in new tax regime, this guide provides a step-by-step statutory breakdown, city classification rules, Section 80GG alternatives, required documentation, and worked calculation examples.

1. What Is House Rent Allowance (HRA) & Section 10(13A)?

House Rent Allowance (HRA) is a specific allowance paid by employers to salaried employees to meet accommodation rental expenses. While HRA forms part of your gross salary, it is not fully taxable by default.

Under Section 10(13A), the Government of India provides tax relief on HRA payments. However, the entire HRA amount received is not automatically tax-free. The exempt portion is calculated using a specific statutory formula, and any excess HRA received beyond the calculated exemption is added to your taxable income.

2. The Statutory 3-Rule Formula for HRA Exemption

To calculate how much HRA is tax free, Section 10(13A) prescribes that the exempt amount is the LEAST of the following three statutory limits:

1. Rule 1 (Actual HRA Received): Total HRA paid by your employer during the financial year.
2. Rule 2 (City Basic Salary Cap):
   • 50% of Basic Salary (+ DA) if you reside in a Metro City.
   • 40% of Basic Salary (+ DA) if you reside in a Non-Metro City.
3. Rule 3 (Rent Paid Excess): Actual annual rent paid minus 10% of Basic Salary (+ DA).

Statutory Formula: $$\text{Tax-Exempt HRA} = \min \Big( \text{Actual HRA}, ; \text{City Cap %} \times \text{Basic}, ; \text{Rent Paid} - (0.10 \times \text{Basic}) \Big)$$

The remaining amount ($\text{Actual HRA Received} - \text{Tax-Exempt HRA}$) is taxable at your applicable income tax slab rate.

3. Metro vs Non-Metro Cities Classification

The percentage cap applied in Rule 2 depends on the geographical location of the rented accommodation:

Note: For income tax calculation purposes, basic salary includes Dearness Allowance (DA) if it forms part of retirement benefits, but excludes performance bonuses, overtime, and special allowances.

4. Is HRA Exemption Available in the New Tax Regime?

A common point of confusion among salaried taxpayers is is HRA available in new tax regime.

• New Tax Regime (Section 115BAC): NO. Under the default New Tax Regime, HRA exemption under Section 10(13A) is completely omitted. You cannot claim any tax deduction for rent paid.
• Old Tax Regime: YES. HRA tax exemption under Section 10(13A) remains fully active and deductible under the Old Tax Regime.

If you pay substantial house rent annually, opting for the Old Tax Regime and using an online HRA calculator alongside our Old vs New Tax Regime Calculator will help you determine whether claiming HRA outweighs lower slab rates under the New Regime. Read our detailed Old vs New Tax Regime Guide for an in-depth breakeven comparison.

5. Section 80GG: Claiming Rent Deduction Without HRA

What if you pay monthly house rent but do not receive HRA from your employer, or you are a self-employed professional?

Under Section 80GG of the Income Tax Act, non-salaried individuals or employees whose salary structure does not include HRA can still claim rent tax deduction.

Section 80GG Statutory Deduction Limits

The deductible amount under Section 80GG is the LEAST of:

1. ₹5,000 per month (₹60,000 per year).
2. 25% of Total Adjusted Income.
3. Actual Rent Paid minus 10% of Total Adjusted Income.

Section 80GG Conditions:

• The taxpayer, their spouse, or minor child must not own residential accommodation at the place of employment.
• The taxpayer must file Form 10BA online on the Income Tax E-Filing portal before submitting their ITR.

6. Mandatory Documents Required to Claim HRA Exemption

To ensure your employer and the Income Tax Department accept your HRA exemption claim without audit notices, maintain the following compliance documents:

1. Rent Receipts: Rent receipts signed by the landlord with revenue stamps affixed for monthly cash payments exceeding ₹5,000, or online bank transfer records.
2. Valid Rent Agreement: A registered or notarized tenancy contract specifying tenant name, landlord details, rent amount, tenure, and property address.
3. Landlord PAN Mandatory Threshold: If annual rent paid exceeds ₹1,00,000 (₹8,333/month), providing the landlord’s PAN to your employer is legally mandatory under CBDT circulars.
4. TDS on Rent under Section 194-IB: If monthly rent paid by an individual exceeds ₹50,000, the tenant must deduct 2% (or 5%) TDS on rent paid and deposit it with the government using Form 26QC.

7. Step-by-Step Worked Calculation Example

Let’s walk through an actual numbers case study matching our statutory calculation engine:

Employee Profile:

• Monthly Basic Salary: ₹50,000 (Annual Basic = ₹6,00,000)
• Monthly HRA Received: ₹20,000 (Annual HRA = ₹2,40,000)
• Actual Monthly Rent Paid: ₹25,000 (Annual Rent Paid = ₹3,00,000)
• Location: Mumbai (Metro City — 50% Basic Cap)

Statutory Rule Calculations:

• Rule 1 (Actual HRA Received): ₹2,40,000
• Rule 2 (50% of Basic Salary): $50% \times ₹6,00,000 = ₹3,00,000$
• Rule 3 (Rent Paid - 10% Basic): $₹3,00,000 - (10% \times ₹6,00,000) = ₹3,00,000 - ₹60,000 = ₹2,40,000$

Results:

• Tax-Exempt HRA Amount: Minimum of (₹2,40,000, ₹3,00,000, ₹2,40,000) = ₹2,40,000
• Taxable HRA Amount: $₹2,40,000 - ₹2,40,000 =$ ₹0 (100% Tax Free!)
• Estimated Annual Tax Savings (at 30% slab rate): ₹72,000 saved per year!

8. How to Calculate Your HRA Exemption in 30 Seconds

Rather than manual math, use QuickDocIndia’s specialized financial engines:

1. Calculate your exact monthly and annual exemption using our free HRA Calculator.
2. Compare take-home pay and tax liability using our Income Tax Calculator and In-Hand Salary Calculator.
3. Draft a legally compliant tenancy agreement in under 3 minutes using our Rent Agreement Generator or read our guide on Rent Agreement Format & Rules.