How is HRA exemption calculated?

⚡ Short answerHRA exemption under Section 10(13A) is the least of three amounts: (1) the actual HRA received, (2) rent paid minus 10% of your basic salary, and (3) 50% of basic salary if you live in a metro (Delhi, Mumbai, Kolkata, Chennai) or 40% for a non-metro. The exemption applies only if you actually pay rent and is available under the old regime.

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The three-way test

Compute all three figures and take the smallest. 'Salary' here means basic plus dearness allowance (and commission if a fixed percentage of turnover). You need rent receipts, and the landlord's PAN if annual rent exceeds ₹1 lakh.

Common situations

If you pay no rent, HRA is fully taxable. If you live in your own house, you can't claim HRA. You can claim HRA and a home-loan deduction together if the home is in a different city or genuinely let out.

Related questions

Can I claim HRA in the new tax regime?

No — HRA exemption is available only under the old regime. The new regime does not allow HRA, so factor that in when comparing regimes.

Related reading

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General information for AY 2026-27, not professional advice. Rules change with each Finance Act / notification and depend on your facts — verify with a licensed CA or advocate before acting.