How is HRA exemption calculated for income tax?

HRA exemption is the minimum of: (1) Actual HRA received from employer, (2) 50% of basic salary for metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40% for non-metro cities, (3) Actual rent paid minus 10% of basic salary. The exemption is available only if you live in rented accommodation.

Can I claim both HRA and home loan interest deduction?

Yes, you can claim HRA for a rented house in one city and home loan interest deduction (Section 24) for a property in another city if you're working away from your owned home. Both deductions are allowed if you can justify the genuine need to live in a rented accommodation.

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Q: Can I claim HRA if I live with my parents?

Yes, you can pay rent to your parents and claim HRA exemption. However, your parents must declare this rental income in their ITR. Ensure you have rent receipts and proof of payment (bank transfers). If rent exceeds ₹1 lakh annually, your parent's PAN is required.

Calculate House Rent Allowance tax exemption for FY 2025-26

Salary & Rent Details

Basic Salary (Monthly) *

₹

HRA Received (Monthly) *

₹

Rent Paid (Monthly) *

₹

City Type

Metro: Delhi, Mumbai, Kolkata, Chennai | Non-Metro: All other cities

HRA Exemption Rules (FY 2025-26)

Exemption is the lowest of:

Actual HRA received
Rent paid minus 10% of basic salary
50% of basic (metro) or 40% (non-metro)

Note: Only available under old tax regime. Not applicable if you opt for new tax regime.

Frequently Asked Questions

Can I claim HRA if I live with my parents?

Yes, you can claim HRA even if you live with parents, provided you pay them rent. Your parents must declare this rental income in their ITR. Rent agreement between you and parents, and rent receipts with their PAN (if annual rent > ₹1L) are mandatory. Payment proof like bank transfer is recommended.

What is Basic Salary for HRA calculation?

Basic Salary is the core salary component, typically 40-50% of CTC, excluding allowances like HRA, special allowance, bonuses. HRA exemption is calculated based on Basic Salary. The formula uses: Actual HRA received, Actual rent minus 10% of Basic, and 50% of Basic (metro) or 40% (non-metro).

Which cities qualify as Metro cities for HRA?

Metro cities for HRA purposes include Delhi, Mumbai, Kolkata, and Chennai. In these cities, you can claim HRA exemption up to 50% of Basic Salary. For all other cities (Non-Metro), the limit is 40% of Basic Salary. This classification significantly impacts your tax savings.

Can I claim HRA exemption under new tax regime?

No, HRA exemption is not available under the new tax regime introduced from FY 2023-24. Only the old tax regime allows HRA exemption under Section 10(13A). If you pay significant rent, choosing the old regime might be more beneficial despite lower tax rates in the new regime.

What documents do I need to claim HRA exemption?

Required documents: Monthly rent receipts, Rent agreement, Landlord's PAN (if annual rent exceeds ₹1 lakh), Bank statements showing rent payments, Declaration to employer. These must be submitted to your employer for processing HRA exemption during salary or to Income Tax Department while filing ITR.

How is HRA exemption calculated?

HRA exemption is the MINIMUM of three amounts: (1) Actual HRA received from employer, (2) Rent paid minus 10% of Basic Salary, (3) 50% of Basic Salary for Metro cities or 40% for Non-Metro. The lowest of these three determines your tax-free HRA amount.

How to Use This Calculator

1
Enter your monthly Basic Salary (core salary component excluding allowances) as shown in your salary slip.
2
Input actual HRA received from employer per month. This is shown separately as HRA component in your CTC structure.
3
Enter monthly rent you actually pay to landlord. Keep rent receipts ready as proof for claiming exemption.
4
Select city type: Metro (Delhi, Mumbai, Kolkata, Chennai) or Non-Metro. This affects your exemption limit (50% vs 40%).
5
Click Calculate to see your tax-exempt HRA amount and how much of your HRA is taxable income.

Key Terms & Definitions

Basic Salary: Core salary component, typically 40-50% of CTC, used as base for calculating various benefits like HRA, PF, gratuity. Excludes allowances and bonuses.
HRA (House Rent Allowance): Salary component provided by employers to help employees cover rental housing expenses. Partially tax-exempt under Section 10(13A) of Income Tax Act.
Metro City: For HRA purposes: Delhi, Mumbai, Kolkata, and Chennai. These cities allow 50% of Basic Salary as maximum HRA exemption vs 40% in non-metro cities.
Section 10(13A): Income Tax Act provision allowing HRA exemption for salaried individuals living in rented accommodation. Only available in old tax regime.
Rent Receipt: Official proof of rent payment required to claim HRA exemption. Must include landlord's PAN if annual rent exceeds ₹1,00,000.
Dearness Allowance (DA): Cost of living adjustment allowance. For HRA calculation purposes, DA is often added to Basic Salary to determine the computation base.

Formulas & Calculations

HRA Tax Exemption Formula

Exemption = LOWEST OF: 1. Actual HRA Received 2. Rent Paid - (10% of Basic Salary) 3. 50% of Basic (Metro) OR 40% of Basic (Non-Metro)

Example: Basic ₹50K, HRA ₹20K, Rent ₹15K, Metro city. Calculate: (1) ₹20K, (2) ₹15K - ₹5K = ₹10K, (3) ₹25K. Exemption = ₹10K (lowest). Taxable HRA = ₹20K - ₹10K = ₹10K.

Taxable HRA Component

Taxable HRA = Actual HRA Received - HRA Exemption

The portion of HRA that doesn't qualify for exemption is added to your taxable income. Example: If you receive ₹20K HRA and exemption is ₹10K, then ₹10K is taxable.

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