How HRA exemption works
Section 10(13A) of the Income Tax Act exempts the least of the three conditions from your taxable salary:
- The actual HRA received from your employer
- Rent paid minus 10% of (Basic + DA)
- 50% of (Basic + DA) for metro cities, or 40% for non-metro
The smallest of these three numbers is tax-free; anything above is taxable salary.
Required for HRA exemption
- You must actually pay rent - own-house occupants get no HRA benefit
- You must not own the rented property
- Rent receipts for the full year (use our rent receipt generator)
- If annual rent exceeds ₹1,00,000, landlord's PAN is mandatory in Form 12BB
HRA in the new tax regime
HRA exemption is not available under the new tax regime (Section 115BAC). If you've opted in, your full HRA is taxable. The new regime offsets this with lower slabs and standard deduction.
When HRA exemption is worth claiming
HRA usually beats the new regime when:
- You live in a metro and rent ≥ 25% of (Basic + DA)
- You also have other 80C/80D/home-loan deductions stacking under the old regime
- Compare both regimes annually with our income tax calculator
Metro list (FY 2026-27)
From FY 2026-27, the Income Tax Department recognises eight cities as metros for HRA: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad. Older rules covered only the first four; this expansion can boost exemptions in the new metros.