Stax

HRA Calculator

Calculate HRA tax exemption for metro and non-metro cities.

Metro cities: Delhi, Mumbai, Chennai, Kolkata (50% rule). All others are Non-Metro (40% rule).

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Understanding HRA exemption

HRA is a component of salary specifically provided to cover rental expenses. The Income Tax Act allows salaried individuals to claim partial or full HRA as exempt from tax, provided they actually live in rented accommodation.

The exemption is calculated as the minimum of three values to prevent over-claiming. If your rent is low relative to your HRA, you won't get the full HRA exempt. Paying higher rent (up to your HRA level) maximises the exemption.

HRA planning tips

  • Negotiate for higher HRA in CTC — restructuring salary to increase HRA and reduce basic can significantly reduce taxable income.
  • Pay rent to parents — if you live with your parents in their property, paying them rent is a legitimate tax-saving strategy. Ensure they declare it as income.
  • Keep documentation— rent receipts, agreement, and landlord PAN (for rent > ₹1L/year) are required to avoid disallowance during assessment.

HRA in the New Tax Regime

HRA exemption is not available under the New Tax Regime (FY 2025-26). If you claim HRA, you must file under the Old Regime. This is one of the main reasons the Old Regime can still be beneficial for employees paying significant rent.

Frequently asked questions

How is HRA exemption calculated?
HRA exemption is the minimum of three conditions: (1) Actual HRA received from employer, (2) 50% of basic salary for metro cities or 40% for non-metro, (3) Actual rent paid minus 10% of basic salary. The lowest of these three is exempt from tax.
Which cities are considered metro for HRA?
For HRA purposes, only four cities are classified as metro: Delhi (NCR), Mumbai, Chennai, and Kolkata. All other cities — including Bengaluru, Hyderabad, Pune, Ahmedabad — are non-metro, attracting the 40% rule.
Can I claim HRA if I live with parents?
Yes, but only if you pay rent to your parents and they include it in their income tax return. You need a proper rent agreement and rent receipts. Your parents' property must be in their name, not yours.
What if I pay rent but don't receive HRA?
If you don't receive HRA (e.g., you're self-employed or HRA is not part of your salary structure), you can claim deduction under Section 80GG — subject to conditions and a maximum of ₹5,000/month or 25% of income.
Do I need rent receipts to claim HRA?
Yes, for any rent above ₹3,000/month (₹36,000/year) your employer will require rent receipts and a rent agreement. If annual rent exceeds ₹1,00,000, the landlord's PAN is also mandatory.

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