HRA Exemption — How to Calculate It Correctly

The rule

Under Section 10(13A) the exemption is the minimum of:

1. HRA actually received
2. Rent paid minus 10% of basic salary (+ DA)
3. 50% of basic for Delhi, Mumbai, Kolkata or Chennai; 40% elsewhere

Worked example

Basic ₹50,000/month, HRA ₹20,000, rent ₹25,000 in Mumbai. (1) ₹20,000; (2) ₹25,000 − ₹5,000 = ₹20,000; (3) 50% × ₹50,000 = ₹25,000. Exempt = ₹20,000 a month, ₹2.4 lakh a year — the whole HRA.

Same person in Pune paying ₹15,000: (2) = ₹10,000, so only ₹10,000 is exempt and ₹10,000 is taxable.

Open the HRA Calculator →

Documents

Rent receipts or a rent agreement, and the landlord's PAN if annual rent exceeds ₹1 lakh. Paying rent to a parent is allowed if they genuinely own the house and declare the income; rent to a spouse is usually challenged.

New regime

HRA exemption does not exist under the new regime. Compare regimes before choosing — at higher rents the old regime may win.

• Confirm you are on the old regime
• Keep monthly rent receipts
• Collect landlord PAN if rent exceeds ₹1 lakh a year
• Check the exemption with the HRA calculator