HRA (House Rent Allowance) exemption can significantly reduce your taxable income - but the calculation involves three conditions and varies by city type (Metro vs Non-Metro). These scenarios show exactly how much exemption you can claim.
The exemption you actually receive is the lowest of three calculations: actual HRA component received, 50% (metro) or 40% (non-metro) of basic salary, and actual rent paid minus 10% of basic. Each scenario walks through all three numbers so you can see which one binds the exemption - usually it's the third (rent − 10% basic) for high-rent cities like Mumbai and the second (50% basic cap) for moderate rent.
How to use these scenarios: match your basic salary and city to the closest example, then read the exemption figure. HRA is available only under the old tax regime; the new regime gives no HRA exemption regardless of your rent. The FAQ below explains city classification, the four "metro" cities recognised by the Income Tax Act, and documentation requirements.
Browse All Scenarios
- HRA — ₹30,000 Basic in Mumbai — Exemption: ₹1,56,000/year
- HRA — ₹50,000 Basic in Mumbai — Exemption: ₹2,40,000/year
- HRA — ₹75,000 Basic in Mumbai — Exemption: ₹4,50,000/year
- HRA — ₹1 Lakh Basic in Mumbai — Exemption: ₹5,76,000/year
- HRA — ₹50,000 Basic in Delhi — Exemption: ₹2,64,000/year
- HRA — ₹50,000 Basic in Bangalore — Exemption: ₹2,52,000/year
- HRA — ₹40,000 Basic in Pune — Exemption: ₹1,68,000/year
- HRA — ₹25,000 Basic in Delhi — Exemption: ₹1,14,000/year
Frequently Asked Questions
Which three conditions decide HRA exemption?
The exemption is the lowest of: (a) actual HRA received from your employer, (b) 50% of basic salary if you live in a metro (Mumbai, Delhi, Kolkata, Chennai) or 40% in any other city, and (c) actual rent paid minus 10% of basic salary. The lowest of the three is the exempt portion; the rest is taxable. These scenarios show which condition becomes binding at different rent and basic combinations.
Is Bangalore a metro for HRA purposes?
No. The Income Tax Act recognises only four metros for HRA: Mumbai, Delhi, Kolkata, and Chennai. Bangalore, Hyderabad, Pune, Gurgaon, Noida, and other Tier-1 cities are treated as non-metro and use the 40% of basic limit. This is a frequent source of confusion - see the dedicated metro-status guides for each major city in the related guides.
Do I need rent receipts to claim HRA?
Yes. For monthly rent above ₹3,000, your employer needs rent receipts (with revenue stamp if rent exceeds ₹5,000/month). For annual rent above ₹1 lakh, you must also provide the landlord's PAN. Without these, the employer will not include the exemption in Form 16 and you'll have to claim it directly while filing your ITR - which often gets flagged for scrutiny.
Can I claim HRA if I live with my parents?
Yes - provided you actually pay rent to your parents and they declare that rent as income in their ITR. The arrangement must look genuine: a rent agreement, monthly bank transfers (not cash), and reporting on both sides. The parent's tax saving from a 30% standard deduction on rental income often makes this beneficial overall, especially if the parent is in a lower bracket.
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