How is HRA exemption calculated?
If you live in a rented house and get House Rent Allowance (HRA) as part of your salary, part of it is tax-free under the old regime. The tax-free part is the lowest of three amounts, all worked out for the year:
1. Actual HRA received
2. Rent paid − 10% of (basic + DA)
3. 50% of (basic + DA) in a metro, or 40% elsewhere Whatever HRA is left over is added to your taxable salary.
Worked example
What changed in 2026
The Income-tax Rules, 2026, which apply from 1 April 2026 along with the new Income-tax Act, 2025, added Bengaluru, Hyderabad, Pune and Ahmedabad to the list of cities where 50% of salary can be exempt. Before this, only Mumbai, Delhi, Kolkata and Chennai counted.
Tips to claim HRA correctly
- Keep rent receipts and a rent agreement, and pay rent by bank transfer where you can.
- If your rent is over ₹1 lakh a year, you must give your employer your landlord's PAN.
- You can pay rent to your parents and claim HRA if they own the house, but they must show the rent as income in their tax return.
- HRA exemption is not available in the new regime. Use our income tax calculator to see which regime is better for you with HRA included.
Frequently asked questions
Can I claim HRA in the new tax regime?
No. The HRA exemption is only available in the old regime. In the new regime, all your HRA is taxable, but the lower slab rates may still work out cheaper overall.
I don't get HRA from my employer. Can I still save tax on rent?
In the old regime, self-employed people and employees without HRA may claim a separate deduction for rent paid, often known as Section 80GG, subject to limits. It is smaller than the HRA exemption for most people.
What counts as 'salary' for HRA?
Basic salary plus dearness allowance (DA), if DA counts for retirement benefits, plus any commission based on a fixed percentage of sales. Other allowances are not included.
Can I claim HRA and a home loan deduction together?
Yes, if you live in a rented house while repaying a home loan, for example because your own house is in another city or not yet ready. You must have genuine reasons and proof for both.