Reviewed October 2026
How HRA exemption is calculated
If you receive House Rent Allowance and pay rent, part of your HRA is tax-free under the old regime. The exempt amount is the lowest of three limits.
From FY 2026-27, the Income-tax Rules, 2026 extend the higher 50% limit to Bengaluru, Hyderabad, Pune and Ahmedabad, in addition to Delhi, Mumbai, Kolkata and Chennai.
The three limits
- Actual HRA received from your employer.
- Rent paid minus 10% of salary (basic + DA).
- 50% of salary if you live in one of the 8 metro cities, 40% elsewhere.
Whichever is lowest is exempt; the rest of your HRA is taxable.
Worked example
Basic salary ₹50,000 a month, HRA ₹20,000, rent ₹25,000, living in Bengaluru. The limits are ₹20,000 (actual HRA), ₹20,000 (₹25,000 − ₹5,000) and ₹25,000 (50% of basic). The exempt HRA is ₹20,000 a month — all of it.
The same person in Jaipur: the third limit becomes ₹20,000 (40%), so the exemption is still ₹20,000. With rent of ₹35,000 in Jaipur, the 40% cap of ₹20,000 would bind, and ₹10,000 of a ₹30,000 HRA would be taxable.
Rules to remember
- HRA exemption is available only in the old tax regime.
- Give your employer the landlord's PAN if annual rent exceeds ₹1 lakh. The new rules also ask you to disclose your relationship with the landlord.
- Paying rent to a parent is allowed if they own the house and declare the rent as income; paying rent to your spouse is generally not accepted.
- If you don't get HRA from your employer, you may be able to claim a deduction for rent under the old regime's separate provision for rent paid (old section 80GG).
Frequently asked questions
Which cities get 50% HRA exemption from FY 2026-27?
Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. All other places get 40%.
Can I claim HRA in the new tax regime?
No. HRA exemption is only available if you choose the old regime.
What counts as 'salary' for HRA?
Basic pay plus dearness allowance (if it counts for retirement benefits) plus any commission based on a fixed percentage of turnover.
Can I claim HRA and a home loan together?
Yes, if you live in a rented house and own a house elsewhere — for example in another city — you can claim both, subject to the rules.