Your salary and rent
Your HRA exemption
Least of these three is exempt
What this means for you
How HRA exemption is calculated
The tax-free part of your house rent allowance is the lowest of three amounts, worked out only for the months you actually lived in a rented home:
- The HRA your employer actually paid you.
- Rent you paid minus 10% of your salary.
- 50% of salary if the home is in one of the listed metro cities, or 40% anywhere else.
Here "salary" means basic pay plus dearness allowance (when it counts for retirement benefits) plus any commission fixed as a percentage of turnover. Other allowances, bonuses and perks are left out. Whatever HRA is not exempt is added to your taxable salary.
Metro cities for HRA: what changed in 2026
The Income-tax Rules, 2026 (Rule 279, read with the Income-tax Act, 2025) apply from 1 April 2026 and widen the 50% list from four cities to eight.
| City | FY 2025-26 | FY 2026-27 onwards |
|---|---|---|
| Mumbai, Delhi, Kolkata, Chennai | 50% | 50% |
| Bengaluru, Hyderabad, Pune, Ahmedabad | 40% | 50% |
| All other cities (including Noida, Gurugram, Thane) | 40% | 40% |
Worked example
Priya lives in Pune in FY 2026-27. Basic is ₹50,000 a month, HRA is ₹25,000 and rent is ₹22,000. For the year: actual HRA is ₹3,00,000, rent minus 10% of salary is ₹2,64,000 − ₹60,000 = ₹2,04,000, and 50% of salary is ₹3,00,000. The lowest, ₹2,04,000, is tax-free and ₹96,000 is taxable. Last year Pune was capped at 40%, but here the rent limit was lower anyway, so her exemption is the same.
Frequently asked questions
Can I claim HRA in the new tax regime?
No. HRA exemption is only available in the old regime. The new regime is the default, so tell your employer you want the old regime if HRA and other deductions make it cheaper for you.
Which cities get 50% HRA in FY 2026-27?
Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Every other city, including Gurugram, Noida and Thane, uses 40%.
When do I need my landlord's PAN?
When the rent you pay is more than ₹1 lakh in the year, your employer needs your landlord's PAN to allow the exemption. Keep rent receipts and the rent agreement in any case.
Can I pay rent to my parents and claim HRA?
Yes, if you genuinely pay rent to a parent who owns the house, the payment is real (preferably by bank transfer) and your parent shows it as rental income in their return. You cannot claim HRA for rent paid to your spouse in a home you share.
Can I claim HRA and a home loan together?
Yes, if you live in a rented home and the house you own is in another city, or is let out or not yet ready. Both claims need to be genuine.
I moved house or my rent changed during the year. What now?
Calculate each period separately with the number of months in it, then add the tax-free amounts together. The calculator's "months you paid rent" field is there for that.
My employer pays no HRA. Can I still save tax on rent?
In the old regime you may be able to claim a separate rent deduction (section 80GG under the 1961 Act), which has its own limits. This calculator covers HRA only.
Sources
- Income-tax Rules, 2026, Rule 279: limits for exempt house rent allowance (8 cities at 50%)
- Income Tax Department: benefits allowable to employees (HRA least-of-three rule, landlord PAN above ₹1 lakh)