HRA Exemption Calculator 2026: Section 10(13A) Least of Three
Work out exactly how much of your House Rent Allowance is tax-free, with the updated eight-city metro list for FY 2026-27, and see precisely which of the three limits is capping your exemption.
Section 10(13A) Least of Three Model: Exempt HRA Estimate
Updated for the FY 2026-27 eight-city metro classificationWhat HRA Exemption Really Means for Your Take-Home Pay
If you rent your home and draw a salary, House Rent Allowance is very likely the single largest tax break sitting in your payslip, and yet it is the one most people get wrong. A software engineer in Bengaluru paying 30,000 rupees a month in rent, a bank officer in Mumbai, a teacher in Jaipur: each is
entitled to shield a chunk of their HRA from tax, but the exact amount depends on a formula that trips up even seasoned employees. This calculator runs that formula precisely, using the rules in force for 2026, and then does something most tools do not: it shows you which part of the formula is actually limiting your exemption. That single piece of insight turns a bare number into something you can act on, whether by adjusting your rent claim, your salary structure, or your regime choice.
House Rent Allowance, commonly shortened to HRA, is a component of salary that employers pay specifically to help meet the cost of rented accommodation. The tax law, under Section 10(13A) of the Income Tax Act read with Rule 2A, allows part of that allowance to be exempt from tax. The catch is that the exempt amount is not simply the HRA you receive, nor a flat percentage.
It is the lowest of three separately calculated figures, and understanding all three is the difference between claiming what you are owed and either overclaiming, which invites scrutiny, or underclaiming, which quietly costs you money every year.
The Least of Three Formula
Your exempt HRA is the smallest of these three amounts. First, the actual HRA you received from your employer during the year. Second, the rent you actually paid minus 10 percent of your salary. Third, 50 percent of your salary if you live in a metro city, or 40 percent if you live anywhere else.
Whichever of these three is lowest becomes your exemption, and the rest of your HRA is added back to your taxable income. The calculator above computes all three and flags the binding one for you.
Salary here has a specific meaning. For HRA purposes, salary means your basic pay plus dearness allowance that forms part of retirement benefits, plus any commission calculated as a fixed percentage of turnover. It does not mean your gross salary or your CTC. Using the wrong salary figure is the most common error, and it usually inflates the claimed exemption, which is exactly what triggers a mismatch notice at assessment. Always feed the calculator your basic and DA, not your total pay, and cross-check those figures against the exact components printed on your monthly payslip.
Old Regime Only, and Why That Matters
The HRA exemption is available only if you file under the old tax regime. Under the new regime, which has been the default since assessment year 2024-25, House Rent Allowance is fully taxable with no exemption at all. This single fact should shape your regime choice if you pay significant rent.
For a high-rent city dweller, the HRA exemption alone can be worth more than the lower slab rates of the new regime, so the calculator shows you the exempt figure precisely so you can weigh it against what the new regime would cost you.
The Big 2026 Change: Eight Metro Cities Instead of Four
For over two decades, only four cities in India qualified for the higher 50 percent HRA rate: Mumbai, Delhi, Kolkata, and Chennai. Every other city, including major economic hubs, was treated as non-metro and capped at 40 percent.
That never reflected reality, since rents in Bengaluru and Pune often rival or exceed those in Chennai or Kolkata. From 1 April 2026, this finally changed.
The Four Newly Added Cities
Under the Income Tax Rules 2026, Rule 279 expanded the metro definition for HRA to eight cities. Bengaluru, Pune, Hyderabad, and Ahmedabad joined the original four. Salaried professionals living in these four newly added cities can now claim 50 percent of their salary as the third limit in the formula, up from 40 percent previously.
For anyone in these cities paying substantial rent, this can mean a meaningfully larger exemption and real tax savings, which is why the calculator lets you pick your financial year and reclassifies these cities automatically.
The transition rule matters. The eight-city list applies to salary earned from FY 2026-27 onward. If you are filing your return for FY 2025-26, due in July 2026, the old four-metro rule still applies and Bengaluru, Pune, Hyderabad, and Ahmedabad remain non-metro at 40 percent for that year. The calculator handles this correctly through the financial year selector, so make sure you pick the right year for the return you are working on.
A Warning on NCR Satellite Towns
The expansion is city-specific, not region-specific. Delhi itself is a metro at 50 percent, but Noida, Gurugram, Faridabad, and Ghaziabad are not on the eight-city list, even though they sit within the National Capital Region. Employees living in those satellite towns compute
their HRA at the 40 percent non-metro rate regardless of how close they are to Delhi. Assuming the whole of NCR gets the metro rate is a costly mistake, so check your actual city of residence, not just the region, before you claim.
Why the Binding Limit Decides Everything
Most people fixate on the metro percentage and assume that is what governs their exemption. In practice, it very often is not. The rent-minus-10-percent limit is frequently the real cap, especially for those whose rent is modest relative to their salary.
This is precisely why running all three figures every year matters, and why the calculator highlights the lowest one rather than just handing you a single number.
An Illustration of the Trap
Consider two colleagues on identical salaries, one in Chennai on the metro rate and one in a non-metro town. You might assume the Chennai employee always wins. But if the Chennai colleague pays low rent, their rent-minus-10-percent figure could be tiny, capping their exemption far below the 50 percent metro ceiling they never actually reach.
Meanwhile the non-metro colleague paying high rent might have a larger rent-based figure and end up with a bigger exemption. The city rate is only a ceiling that you may never actually reach; the rent limit is what usually bites first and decides the real number.
What to do with the binding limit. Once you see which limit is capping you, you know exactly what would and would not help. If the rent-minus-10-percent figure is binding, paying genuinely higher rent (or ensuring you claim all the rent you actually pay) lifts your exemption. If the city percentage is binding, only a higher basic salary would help. And if actual HRA is the cap, your employer would need to restructure your pay. The calculator turns a single number into an actionable insight you can genuinely use when planning your taxes.
The Reclassification Does Not Always Help
Here is a subtlety the eight-city headlines miss. Moving Bengaluru from 40 to 50 percent only helps if the city percentage was the binding limit in the first place. If your exemption was already capped by rent-minus-10-percent, the higher metro rate changes nothing, because you never reached the old ceiling either.
The calculator makes this obvious: run your numbers under both financial years and watch whether the exempt figure actually moves. For high-rent earners in these cities it often jumps; for modest-rent earners it may not budge.
Section 80GG: The Fallback When You Have No HRA
Not everyone who pays rent receives House Rent Allowance. Self-employed professionals, freelancers, and salaried people whose pay structure simply has no HRA component are all shut out of Section 10(13A). For them, the law provides a separate, smaller relief under Section 80GG, and it is worth understanding because many eligible renters never claim it.
How Section 80GG Works
The Section 80GG deduction is the least of three figures: five thousand rupees a month, 25 percent of your total income, or the rent you pay minus 10 percent of your total income. The overall deduction is capped at 60,000 rupees a year. Like HRA, it is available only under the old tax regime. To claim it you must not receive HRA from any employer, and neither you, your spouse, nor your minor child may own residential property in the city where you live and work.
File Form 10BA to claim 80GG. Claiming the Section 80GG deduction requires filing a declaration in Form 10BA, confirming that you pay rent and meet the conditions. This is a step many renters miss. If you have no HRA in your salary and you rent your home, check whether 80GG applies to you, because while it is more modest than the HRA exemption, 60,000 rupees of deduction still lowers your tax bill meaningfully year after year.
HRA Versus 80GG at a Glance
The HRA exemption under Section 10(13A) is almost always more generous than Section 80GG, because it is uncapped and scales with your salary and rent, whereas 80GG is hard-capped at 60,000 rupees. If your employer can add an HRA component to your salary structure, that is usually worth pursuing, since it unlocks the far larger exemption. Use 80GG only when HRA genuinely is not available to you, and treat it as a useful floor rather than the main event.
Common HRA Mistakes That Cost Taxpayers Money
HRA looks simple, but a handful of recurring errors either shrink the exemption people are entitled to or, worse, inflate it and invite a notice. Knowing these in advance protects both your refund and your peace of mind at assessment.
Using the Wrong Salary Figure
The most frequent mistake is applying the percentages to gross salary or CTC instead of basic plus dearness allowance. Because both the 10 percent deduction and the metro percentage hinge on this salary figure, using an inflated base produces an inflated exemption that will not match your Form 16 or the department’s records. Always pull the exact basic and DA from your payslip and use only those, both in this calculator and in your return.
Assuming the Metro Rate Always Governs
Many taxpayers confidently claim 50 percent of salary as their exemption without checking the other two limits. In reality the rent-minus-10-percent figure very often bites first and caps the exemption well below the metro ceiling. Claiming the full metro percentage when a lower limit actually applies is a straightforward overclaim. Running all three limits, as this tool does, prevents that error and shows you the defensible number.
Forgetting the landlord PAN and receipts. Where annual rent crosses one lakh rupees, the landlord’s PAN is mandatory, and rent receipts are always advisable. Claims without proper documentation are the easiest for the department to disallow during processing. Gather receipts through the year and obtain the PAN early, especially for high rents, so your claim has a solid paper trail if it is ever questioned.
Missing the Claim Entirely at Filing
Perhaps the costliest mistake is not claiming HRA at all. Employees who did not submit rent proof to payroll often assume they have lost the benefit, but you can always claim the correct exempt amount directly in your income tax return, regardless of what TDS was deducted. Every year, many salaried renters overpay tax simply because they never entered their HRA exemption in the return. Do not be one of them.
HRA Reference Tables for 2026
These tables summarise the city classification, the formula, and the documents you need.
Metro City Classification by Financial Year
| City | FY 2025-26 Rate | FY 2026-27 Rate |
|---|---|---|
| Mumbai | 50% | 50% |
| Delhi | 50% | 50% |
| Kolkata | 50% | 50% |
| Chennai | 50% | 50% |
| Bengaluru | 40% | 50% |
| Pune | 40% | 50% |
| Hyderabad | 40% | 50% |
| Ahmedabad | 40% | 50% |
| Noida, Gurugram, other NCR | 40% | 40% |
| All other cities | 40% | 40% |
The Three Limits Explained
| Limit | How It Is Calculated |
|---|---|
| Limit 1 | Actual HRA received from employer during the year |
| Limit 2 | Rent paid during the year minus 10% of salary |
| Limit 3 | 50% of salary (metro) or 40% of salary (non-metro) |
| Exemption | The lowest of the three above |
Documents and Thresholds
| Requirement | Detail |
|---|---|
| Rent receipts | Signed by landlord, needed as proof |
| Landlord PAN | Mandatory if annual rent exceeds Rs 1,00,000 |
| Rent agreement | Often required by employers, especially above Rs 15,000 a month |
| Salary definition | Basic plus DA plus turnover commission only |
| Regime | Old regime only, not available in new regime |
| Fallback if no HRA | Section 80GG, capped at Rs 60,000 a year |
How HRA Fits Into Your Wider Tax Planning
HRA does not exist in isolation. For a salaried renter, it is one of several levers that together decide whether the old regime or the new regime leaves more money in your pocket. Seeing how it interacts with your other deductions is the difference between a rushed regime choice and a deliberate one that genuinely minimises the tax you pay across the whole year.
The Old Versus New Regime Decision
Because HRA exemption vanishes under the new regime, a renter paying substantial rent starts the old-versus-new comparison with a large advantage already sitting on the old-regime side. Add your other old-regime deductions, such as Section 80C investments, home loan interest, and health insurance under 80D, and the old regime often wins comfortably for renters. The new regime, with its lower slab rates but no HRA, tends to suit those who rent little or own their home outright. Calculate your exact HRA exemption first, then run both regimes with all your deductions before committing.
Restructuring salary can unlock more HRA. If your salary has a small basic and a large set of other allowances, both your HRA and its exemption may be smaller than they could be, since the formula rests on basic plus DA. Where your employer allows it, a higher basic component can lift the exemption, though it also affects provident fund and gratuity. Discuss any restructuring with your payroll team and weigh the full picture, not just the HRA angle, before making changes.
Keeping Records Through the Year
Good HRA planning is really good record-keeping. Collecting rent receipts each month, noting your landlord’s PAN where rent exceeds one lakh rupees, and keeping bank evidence of every payment turns a potentially fragile claim into a solid one. If you move cities, change jobs, or see your rent revised mid-year, note the dates, because the exemption is prorated across those periods. A little discipline through the year makes filing straightforward and your claim resilient to any query.
Worked HRA Examples from Bengaluru, Mumbai and Jaipur
These three cases show how the binding limit and the city change actually play out.
Arjun earns 8 lakh basic, gets 4 lakh HRA, and pays 4.8 lakh rent in Bengaluru. In FY 2025-26 at 40 percent, his third limit was 3.2 lakh, which was the lowest, so only 3.2 lakh was exempt and 80,000 was taxable.
In FY 2026-27, with Bengaluru now a metro at 50 percent, his third limit rises to 4 lakh, and now his full 4 lakh HRA is exempt. The reclassification saved him tax on 80,000 rupees.
Priya earns 3.6 lakh basic in Mumbai, a metro. Her actual HRA is 1.8 lakh, her 50 percent limit is 1.8 lakh, but her rent minus 10 percent of salary is only 1.44 lakh.
The lowest is 1.44 lakh, so that is her exemption, and 36,000 of her HRA is taxable. Even though she is in a top metro, the metro rate never bound her; the rent limit did.
Sanjay earns 6 lakh basic in Jaipur, a non-metro at 40 percent. His actual HRA is 2.4 lakh, his 40 percent limit is 2.4 lakh, and his rent minus 10 percent of salary is 1.56 lakh.
The lowest is 1.56 lakh, which becomes his exemption, leaving 84,000 taxable. Jaipur is not on the eight-city list, so the 2026 change does not affect him at all.
Six Practical Tips to Maximise Your HRA Exemption
Run All Three Limits Every Year
Never assume the metro percentage governs your exemption. Your salary, rent, and city change over time, and so does the binding limit. Recompute all three figures each financial year with your current numbers. The calculator above does this instantly and shows which limit is capping you, so you always know whether a rent or salary change would actually improve your exemption.
Use Basic Plus DA, Never Gross
The salary figure in the formula is only basic pay plus dearness allowance, plus turnover commission where it applies. Feeding in gross salary or CTC inflates the 10 percent and the percentage limits incorrectly, and usually leads to an overclaim that the tax department flags.
Check your payslip for the actual basic and DA components and use only those, both in the calculator and in your return.
Keep Rent Receipts and Landlord PAN
The exemption stands or falls on proof. Keep monthly rent receipts signed by your landlord, and a rent agreement where your employer requires one. If your annual rent exceeds one lakh rupees, you must report your landlord’s PAN to claim the exemption. Gather these documents through the year rather than scrambling at filing time, and the claim will pass smoothly.
Confirm Your City, Not Just Your Region
City classification is specific. Delhi is a metro, but Noida and Gurugram are not, despite being in NCR. From FY 2026-27, Bengaluru, Pune, Hyderabad, and Ahmedabad are metros, but their surrounding rural areas may not be.
Check the exact city of your residence against the current list for your financial year, because getting this wrong changes your third limit and your whole exemption.
Weigh HRA Against the New Regime
HRA exemption exists only in the old regime. If you pay high rent, the exemption can be worth more than the new regime’s lower slab rates, tilting the choice toward the old regime.
Calculate your exempt HRA here, then compare your total old-regime tax with the new-regime figure before you lock in your regime for the year. For many renters in high-cost cities, HRA is the single deciding factor in that whole comparison.
Claim in Your Return Even If Payroll Missed It
If your employer did not capture your HRA exemption in Form 16, you can still claim the correct exempt amount directly in your income tax return. Many salaried people lose out simply because they did not submit rent proof to payroll in time.
Compute the right figure with the least-of-three formula, enter it in your return, and claim what you are legally owed regardless of what TDS was deducted.
HRA Quick Reference for 2026
| Question | Answer |
|---|---|
| Governing section | Section 10(13A), Rule 2A |
| Exemption formula | Least of three amounts |
| Metro rate | 50% of salary |
| Non-metro rate | 40% of salary |
| Metro cities FY 2025-26 | Mumbai, Delhi, Kolkata, Chennai |
| Metro cities FY 2026-27 | The four plus Bengaluru, Pune, Hyderabad, Ahmedabad |
| Salary means | Basic plus DA plus turnover commission |
| Rent limit | Rent paid minus 10% of salary |
| Available in new regime | No, old regime only |
| Landlord PAN needed | If annual rent over Rs 1 lakh |
| Fallback if no HRA | Section 80GG |
| 80GG annual cap | Rs 60,000 |
| NCR satellite towns | Non-metro, 40% |
| Basis of city | Where you reside, not office |
| Mid-year move | Prorate month by month |
Frequently Asked Questions on HRA Exemption
How is HRA exemption calculated?
Which cities are metro cities for HRA in 2026?
Is Bengaluru a metro city for HRA?
Can I claim HRA exemption under the new tax regime?
What counts as salary for HRA calculation?
Why is my HRA exemption lower than the metro percentage?
Do I need my landlord’s PAN to claim HRA?
Can I claim both HRA and a home loan?
What if I live in an NCR city like Noida or Gurugram?
I do not receive HRA. Can I still claim rent relief?
How does a mid-year city or salary change affect HRA?
Is HRA exemption capped at a maximum amount?
Can I claim HRA if I pay rent to my parents?
What documents do I need to claim HRA exemption?
Does the 2026 metro expansion always increase my exemption?
Where do I enter HRA exemption in my tax return?
Can I claim HRA for rent paid in a different city from my job?
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Disclaimer and Editorial Transparency
This HRA exemption calculator is provided for educational and illustrative purposes only. It computes the exemption under Section 10(13A) of the Income Tax Act read with Rule 2A, using the least-of-three formula and the metro city classification in force for the financial year you select.
The expansion of the metro list to eight cities (adding Bengaluru, Pune, Hyderabad, and Ahmedabad) applies from FY 2026-27 under the Income Tax Rules 2026; for FY 2025-26 the original four-metro list applies.
HRA exemption is available only under the old tax regime and is not allowed under the new regime. The results here depend entirely on the figures you enter and assume salary means basic plus dearness allowance plus turnover commission.
This tool does not constitute tax advice. Individual circumstances, mid-year changes, and documentation requirements can affect your actual entitlement. Consult a qualified chartered accountant or tax adviser before filing.
For authoritative and current rules, refer to the Income Tax Department at incometax.gov.in and the Central Board of Direct Taxes at cbdt.gov.in. CalcWise.Finance receives no commission of any kind and performs all calculations locally in your browser without storing any personal financial data.