How HRA exemption is calculated
If you live in a rented home and your salary includes house rent allowance, part or all of it can be tax-free in the old regime. The tax-free amount is the smallest of three figures:
- The HRA you actually received.
- The rent you paid, minus 10% of your salary.
- 50% of your salary if you live in Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad; 40% anywhere else.
Here, salary means basic pay plus dearness allowance (and commission based on turnover, if any). Other allowances don't count.
For a basic salary of ₹50,000 a month, HRA of ₹20,000 and rent of ₹25,000 in Bengaluru, the three figures are ₹2,40,000, ₹2,40,000 and ₹3,00,000 for the year, so ₹2,40,000 is tax-free.
What changed in 2026
From tax year 2026-27, the Income-tax Rules, 2026 extend the 50% limit to Bengaluru, Hyderabad, Pune and Ahmedabad, in addition to Delhi, Mumbai, Kolkata and Chennai. If you rent in one of these four cities, more of your HRA may now be tax-free than before.
Questions people ask
Can I claim HRA in the new tax regime?
No. The HRA exemption is available only in the old regime. Use our income tax calculator to see whether your HRA and other deductions make the old regime cheaper.
Which cities get 50%?
From tax year 2026-27: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad. Everywhere else, the limit is 40% of salary.
Do I need my landlord’s PAN?
Yes, if your rent is more than ₹1 lakh a year. If your landlord has no PAN, they can sign a declaration instead. Keep rent receipts or a rent agreement in either case.
Can I pay rent to my parents and claim HRA?
Yes, if you genuinely pay rent, the house belongs to them, and they show the rent as income in their tax return. You cannot claim HRA for rent paid to your spouse.
I don’t get HRA from my employer. Can I still save tax on rent?
If you are self-employed or your salary has no HRA, the old regime has a separate deduction for rent paid (earlier section 80GG), with lower limits. This calculator covers HRA only.
Method and sources
Exempt HRA = least of HRA received, rent paid − 10% of salary, and 50% (8 cities) or 40% of salary, for the months you paid rent. Salary = basic + DA. Based on the Income-tax Act, 2025 and Income-tax Rules, 2026 for tax year 2026-27. Applies only if you choose the old regime. How we calculate.
Last reviewed 22 Oct 2026 by the WealthFeedz team.