HRA Exemption Calculation — Rules, Rent Receipts and Landlord PAN

1. Actual HRA received from your employer for the year.
2. Rent paid minus 10% of salary. If rent is low relative to salary, this limb can fall to zero.
3. 50% of salary for metro cities, 40% for others. From FY 2026-27, the Income-tax Rules, 2026 (in force from 1 April 2026) apply the 50% rate in eight cities: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Earlier years used only the first four, so returns for FY 2025-26 still follow the four-city list.

The calculation is done for the period you actually pay rent. If you move cities or your rent changes mid-year, it is worked out separately for each period.

Basic salary ₹40,000 a month (no DA), HRA ₹20,000 a month, rent ₹22,000 a month. Annual figures:

• Actual HRA: ₹2,40,000
• Rent minus 10% of salary: ₹2,64,000 − ₹48,000 = ₹2,16,000
• 50% of salary (metro): ₹2,40,000 · 40% of salary (non-metro): ₹1,92,000

Metro: exemption is ₹2,16,000; the remaining ₹24,000 of HRA is taxable. Non-metro: exemption is ₹1,92,000; ₹48,000 is taxable. For someone in the old regime's 30% slab, a ₹2.16 lakh exemption saves about ₹67,400 of tax including 4% cess; in the 20% slab, about ₹44,900. Run your own numbers in the HRA Exemption calculator.

Note that raising rent does not raise the exemption without limit. Once rent minus 10% of salary is higher than the other two amounts, the exemption is capped by actual HRA or the 50%/40% limit.

The new regime — the default for FY 2026-27 — does not allow HRA exemption, 80C or most other deductions. It offers lower slabs, a ₹75,000 standard deduction and nil tax up to ₹12 lakh of taxable income instead. A large HRA exemption is one of the main reasons the old regime can still win for some renters, but only if your total deductions are big enough. Compare both with the old vs new regime tool, and see our regime comparison guide.

A note on law: the Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 and renumbers provisions. The HRA exemption, long known as Section 10(13A), carries over in substance; forms may show new section numbers.

• Rent receipts or rent agreement: employers usually ask for receipts showing the amount, period, address and landlord's name and signature. Keep bank transfer records; paying rent by bank transfer makes the trail easy to prove.
• Landlord's PAN above ₹1 lakh a year: if annual rent exceeds ₹1 lakh (about ₹8,333 a month), employers are required to collect the landlord's PAN. If the landlord has no PAN, a declaration from the landlord is generally needed.
• TDS on high rent: if you pay more than ₹50,000 a month, you as the tenant must deduct TDS at 2% on the rent and deposit it, even as a salaried individual.
• Missed the employer deadline? You can still claim the exemption in your income tax return under the old regime, as long as you have the proof.

• Rent to parents: allowed if the arrangement is genuine, rent is actually paid, and the parent owns the house and reports the rent as income. Rent paid to a spouse is generally not accepted.
• Own a house in the same city: HRA can still be claimed if you genuinely live in a rented home, but expect questions; keep the reason documented.
• HRA and home-loan interest together: both can be claimed in the old regime if the owned house is elsewhere or you have a genuine reason not to live in it.
• No HRA in salary: self-employed people and employees without HRA can look at the separate rent deduction (Section 80GG), capped at ₹5,000 a month and subject to conditions.

To see how HRA fits into your full pay, try the CTC to In-Hand calculator, then calculate the exact exemption with the HRA Exemption calculator.