HRA Exemption in India 2026 — The Complete Guide
House Rent Allowance (HRA) is one of the most valuable exemptions a salaried Indian can claim — but in 2026 it comes with a trap that catches lakhs of people every year: HRA exemption exists only under the old tax regime. The new regime, which has been the default since FY 2023-24, strips HRA out entirely. So before you celebrate a tax saving, you have to be on the old regime to get it at all. This calculator computes your exemption with the exact Section 10(13A) "least of three" rule, applies the right metro or non-metro percentage, and shows you what you actually save — and it warns you, loudly, if you've picked the regime where the saving is zero.
The Section 10(13A) "Least of Three" Rule
Your exempt HRA is the smallest of these three figures, computed for the year:
| # | Limit | Formula |
|---|---|---|
| 1 | Actual HRA received | The HRA on your payslip × 12 |
| 2 | Metro / non-metro cap | 50% (metro) or 40% (non-metro) of (basic + DA) |
| 3 | Rent over threshold | Rent paid − 10% of (basic + DA) |
Whichever is lowest is exempt; the rest of the HRA you received is added to your taxable salary. In practice, limit 3 (rent minus 10% of salary) is the binding one for most renters — your exemption is effectively capped by how much rent you actually pay.
How HRA Exemption Is Calculated
Exempt HRA = min( Actual HRA, 50%/40% of Basic+DA, Rent − 10% of Basic+DA )
- Salary for every percentage here means basic + DA (and commission as a fixed % of turnover, if any) — never gross CTC.
- Metro (Delhi, Mumbai, Kolkata, Chennai) uses 50%; everywhere else uses 40%.
- Taxable HRA = HRA received − exempt HRA. This is added to your income and taxed at your slab.
- Tax saved ≈ exempt HRA × your slab rate × 1.04 (cess) — but only if you're on the old regime.
Metro vs Non-Metro — Which Cities Qualify
| City type | Cities | Salary % limit |
|---|---|---|
| Metro | Delhi, Mumbai, Kolkata, Chennai | 50% of basic + DA |
| Non-metro | Bangalore, Pune, Hyderabad, Ahmedabad, Gurgaon, Noida, and every other city/town | 40% of basic + DA |
Note the surprise: Bangalore, Pune and Hyderabad are not metros for HRA, despite being major IT hubs. The four-metro list is fixed by income-tax rules, not by city size.
Old Regime vs New Regime — Why It Decides Everything
| Feature | Old regime | New regime (default) |
|---|---|---|
| HRA exemption (10(13A)) | ✅ Allowed | ❌ Not allowed |
| 80C, 80D, home-loan interest | ✅ Allowed | ❌ Mostly not allowed |
| Slab rates | Higher | Lower |
| Default if you do nothing | No | Yes |
If you pay meaningful rent, the HRA exemption can swing the decision toward the old regime even though its slab rates are higher. The only way to know is to compute your tax both ways — old-regime-with-HRA-and-deductions versus new-regime-with-lower-slabs — and pick the lower. Use our in-hand salary calculator and income tax calculator to compare both regimes side by side.
Documents You Need to Claim HRA
- Rent receipts for the year (monthly or quarterly), signed by the landlord.
- Landlord's PAN if your annual rent exceeds ₹1,00,000 — or a signed no-PAN declaration.
- Proof of payment — bank transfer/UPI is far safer than cash.
- A rent agreement is strongly recommended, especially if you rent from a relative.
Common HRA Mistakes to Avoid
- Claiming HRA on the new regime. It's worth zero there — switch to old regime first or the exemption vanishes.
- Using gross salary instead of basic + DA. The 50%/40%/10% are on basic+DA only; using CTC over-claims.
- Treating Bangalore/Pune/Hyderabad as metros. They're non-metro (40%), not 50%.
- No landlord PAN over ₹1 lakh rent. Missing it can get the whole claim disallowed.
- Paying cash rent to family with no receipts. The most-audited HRA claim — keep it genuine and documented.
- Claiming HRA while living in your own home-loan house. Not allowed; HRA needs rent actually paid on a home you don't own.
Frequently Asked Questions
How is HRA exemption calculated?
It's the least of three: actual HRA received, 50% (metro) or 40% (non-metro) of basic+DA, and rent paid minus 10% of basic+DA. The smallest of the three is exempt.
Can I claim HRA under the new tax regime?
No. HRA exemption is an old-regime benefit only. The default new regime removes it, so the entire HRA becomes taxable unless you opt for the old regime.
Is Bangalore a metro for HRA?
No. Only Delhi, Mumbai, Kolkata and Chennai are metros (50%). Bangalore, Pune, Hyderabad and all other cities are non-metro (40%).
What is "salary" for HRA?
Basic salary + dearness allowance (forming part of retirement benefits) + commission as a fixed % of turnover. Not gross CTC, not other allowances.
Do I need my landlord's PAN?
Yes, if annual rent exceeds ₹1,00,000. Otherwise a self-declaration may be accepted, but PAN is the safe path.
Can I claim HRA and a home loan together?
Yes, in genuine cases — e.g. you rent where you work and own (with a loan) a house elsewhere. Both are allowed under the old regime when each is real and documented.