HRA Exemption Calculator (FY 2026-27)

HRA Exemption Formula — The Three-Condition Rule

Section 10(13A) read with Rule 2A does not give you a single formula. It gives you three ceilings and hands you the lowest one. Most people assume their whole HRA is tax-free, or that paying more rent always helps. Neither is true, and this table shows why:

“Salary” here means Basic pay + Dearness Allowance that forms part of retirement benefits + commission calculated as a fixed percentage of turnover. It never means CTC or gross salary. That single definition is where most manual calculations go wrong, and it is why a salary structure loaded with special allowance instead of basic quietly costs you exemption every year.

The calculator above highlights which of the three conditions is capping you, so you know whether paying more rent would help, or whether you need to ask HR to restructure your basic pay. None of the other HRA calculators tell you that.

Metro City List for HRA in FY 2026-27 (Now 8 Cities)

This is the single biggest HRA change in years, and it is worth real money. Under the Income-tax Rules, 2026, which operationalise the Income-tax Act, 2025 from 1 April 2026, four more cities move from the 40% cap to the 50% cap. If you rent in Bengaluru, Hyderabad, Pune or Ahmedabad, your exemption ceiling just went up by a quarter.

The timing trap: the ITR you file during 2026 is for FY 2025-26, and for that year Bengaluru, Hyderabad, Pune and Ahmedabad are still 40% cities. Claiming 50% on that return is a mistake that will come back as a notice. The 50% rate applies to income earned from 1 April 2026 onwards, which you will file in 2027. The calculator has a financial year switch precisely for this — set it to FY 2025-26 for your current filing and FY 2026-27 for planning and for the declaration you give your employer.

Note also what has not changed: HRA metro status has nothing to do with the 7th Pay Commission X/Y/Z city classification your employer may use to decide how much HRA to pay you. That is a pay-structure rule. Section 10(13A) has its own list, and only that list decides your exemption.

Worked Example: HRA Calculation Step by Step

Take Ananya, a software engineer in Bengaluru. Her Basic + DA is ₹60,000 a month, her HRA is ₹30,000 a month, and she pays ₹40,000 a month in rent. Annually that is ₹7,20,000 basic, ₹3,60,000 HRA and ₹4,80,000 rent.

Same salary, same rent, same flat — ₹22,464 more in her pocket simply because Bengaluru became a metro for HRA in FY 2026-27. Notice too that in FY 2025-26 her limit was the 40% cap, so paying even more rent would not have helped her at all; only a higher basic salary would have.

HRA Exemption Chart by Salary and Rent (FY 2026-27)

A ready reckoner for the most common salary and rent combinations, assuming HRA is 50% of Basic + DA — the standard private-sector structure. All figures are annual and computed with the same engine as the calculator above.

Read the first three rows carefully: at modest rents the metro and non-metro columns are identical, because the binding limit is rent minus 10% of salary, not the city percentage. The 50% metro rate only starts paying off once your rent crosses roughly half your basic salary. That is the practical takeaway the top-ranking HRA calculators never spell out.

HRA Is Old Regime Only — Check Before You Count On It

This deserves its own section because it is the mistake that costs people the most. HRA exemption under Section 10(13A) is not available in the new tax regime, which has been the default since FY 2023-24. If you never told your employer otherwise, you are on the new regime and your entire HRA is taxable.

So the real question is not “how much HRA can I exempt” but “does my HRA, together with 80C, 80D, home loan interest and NPS, add up to more than the new regime saves me anyway?” For most salaried people earning under about ₹15 lakh, the answer is no — the new regime still wins, and the HRA exemption is a number on paper.

Run your own figures before deciding: the Old vs New Tax Regime Calculator shows the exact break-even deduction amount at your income, and the Income Tax Calculator FY 2026-27 puts your HRA exemption into a full tax computation. We also broke down the salary-by-salary numbers in Old vs New Tax Regime 2026 — a salary-wise comparison.

Claiming HRA While Paying Rent to Your Parents

This is legal and settled, but it is also one of the most scrutinised claims in Indian tax. It works only if the arrangement is genuine, so treat it exactly like any other tenancy:

• Your parent must actually own the property. You cannot pay rent for a house you own yourself, even partly.
• Pay by bank transfer, every month. Cash withdrawals followed by a lump-sum “rent” entry in March is the classic pattern that gets disallowed.
• Have a rent agreement and monthly receipts. Same paperwork as a stranger landlord.
• Your parent must declare the rent as income from house property in their own ITR, after the 30% standard deduction. If they are in a lower slab or below the exemption limit, the family still comes out ahead.
• Disclose the relationship. From FY 2026-27 the rules explicitly require you to state your relationship with the landlord when annual rent crosses ₹1 lakh.
• Keep the rent realistic. A rent far above local market rates for that flat is the fastest way to draw questions.

Paying rent to a spouse is a different matter. Tribunals have allowed it in narrow, well-documented cases, but assessing officers routinely disallow it because a husband and wife are treated as living together as one household. If you can avoid structuring it that way, do.

Can You Claim HRA and Home Loan Together?

Yes — they are separate provisions serving separate purposes. HRA under Section 10(13A) covers the house you rent and live in. Home loan interest under Section 24(b) and principal under 80C cover the house you own. Nothing in the Act says you may only have one.

Claiming both is comfortable when your own house is in a different city, is genuinely let out to tenants, is still under construction, or is too far from your workplace to live in. The claim gets flagged when you own a house and rent another one in the same city without a convincing reason — that is where assessing officers ask for the rent agreement, the bank transfers and the commute distance.

If you are weighing a home loan against continuing to rent, run the numbers on the Home Loan Eligibility Calculator and the EMI Calculator first — a large HRA exemption is a genuine part of the cost of buying, and it disappears the day you move into your own flat.

Documents and Compliance You Actually Need

Missed the proof deadline at work? You have not lost the exemption. Your Form 16 will show the full HRA as taxable, but you can compute the exemption yourself, reduce taxable salary while filing your ITR and claim the excess TDS back as a refund. Keep the paperwork ready, because a refund claim of this kind is exactly the sort that gets picked for verification.

Six Mistakes That Get HRA Claims Rejected

• Using gross salary or CTC instead of Basic + DA. This inflates every condition and produces an exemption you cannot defend. It is the most common error in manual calculations.
• Claiming 50% for Bengaluru, Hyderabad, Pune or Ahmedabad in the FY 2025-26 return. The new rate starts with FY 2026-27 income. Getting the year wrong turns a legitimate claim into a shortfall notice.
• Assuming the whole HRA is tax-free. It almost never is. In most real salary structures the rent-minus-10% condition caps you well below the full HRA.
• Paying rent in cash with no trail. Without bank transfers and receipts, the claim rests on nothing. Fabricated receipts have led to penalty proceedings, and the department now cross-checks the landlord's reported rental income.
• Applying one calculation to a year in which the city or rent changed. Exemption is computed period by period. Moving from Indore to Pune in October means two separate calculations added together.
• Forgetting you are on the new regime. Claiming HRA in a new-regime return simply gets adjusted away at processing.

One structural point worth raising with HR: if the 50%/40% condition is what caps you, a higher basic salary raises your exemption ceiling directly. It also raises your EPF contribution and your gratuity. That is usually a good trade, but it does reduce your monthly in-hand pay, so decide with the numbers in front of you.

No HRA in Your Salary? Use Section 80GG Instead

If your salary has no HRA component, or you are self-employed and pay rent, Section 10(13A) is closed to you — but Section 80GG is not. The deduction is the least of ₹5,000 a month (₹60,000 a year), 25% of total income, or rent paid minus 10% of total income.

The conditions are strict: neither you, your spouse nor your minor child may own a house in the city where you work or live, you must file Form 10BA, and — like HRA — it is available only under the old tax regime. The ₹60,000 annual ceiling makes it far weaker than a real HRA claim, which is why asking HR to add an HRA component to your salary structure is usually worth more than the 80GG route.

Either way, if the old regime is where you are headed, make the rest of it count too: ELSS, PPF and NPS are the deductions that stack on top of HRA to make the old regime competitive.

How to Use This HRA Exemption Calculator

1. Pick monthly or yearly. Monthly is easier — copy the three numbers straight off your salary slip.
2. Enter Basic + DA, HRA received and rent paid. Use basic pay, not CTC. If your DA does not form part of retirement benefits, leave it out.
3. Choose your city. The calculator applies 50% or 40% automatically, so you never have to guess whether your city counts as a metro.
4. Set the financial year. FY 2025-26 for the ITR you file this year, FY 2026-27 for planning and your employer declaration. This matters if you live in Bengaluru, Hyderabad, Pune or Ahmedabad.
5. Adjust the months if you did not rent all year. Joined in August? Set it to eight months and the whole calculation is done on that period.
6. Read the result and the highlighted condition. You get exempt HRA, taxable HRA, the actual tax saved at your slab, and which of the three conditions is limiting you.

If your rent or city changed mid-year, run the calculator once per period with that period's months and figures, then add the exemptions together. That is exactly how the rule is applied, and it is usually more favourable than a single averaged calculation.

Frequently Asked Questions — HRA Exemption