HRA Exemption Calculator: How Much Tax Can You Save on House Rent?
HRA exemption under Section 10(13A) is the least of three amounts: actual HRA received, rent paid minus 10% of salary (basic + DA), and 50% of salary in metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40% elsewhere. Only the old tax regime allows this exemption — under the new regime, HRA is fully taxable.
ITR season means the same question keeps showing up on payslips: how much of my House Rent Allowance is actually tax-free? Guessing "rent minus 10%" is incomplete. The law uses three caps, and only the smallest one becomes your exemption.
This guide walks through that formula, metro vs non-metro, why the new regime ignores HRA, and how to use the annual exempt figure when you compare regimes. For the ₹12 lakh / ₹12.75 lakh new-regime puzzle, see New Tax Regime: Why ₹12 Lakh Salary Isn't Actually Your Tax-Free Limit.
The Section 10(13A) formula in plain English
Exempt HRA is the least of these three:
- Actual HRA received — what your employer paid as HRA for the period
- Rent paid − 10% of salary — excess rent over one-tenth of salary (floored at zero)
- City percentage of salary — 50% if you live in Delhi, Mumbai, Kolkata, or Chennai; 40% anywhere else
Salary for HRA = basic salary + dearness allowance that forms part of retirement benefits. Other allowances usually do not count here.
Exempt HRA = min( actual HRA, rent − 10% of salary, 50% or 40% of salary )
Taxable HRA = actual HRA − exempt HRA
Whichever of the three is smallest is the "limiting factor." That is the number that decides how much tax you can save on rent — not the headline HRA on your CTC.
Worked example (metro, monthly)
Assume Mumbai (metro), monthly figures:
| Input | Amount |
|---|---|
| Basic salary | ₹60,000 |
| DA | ₹0 |
| HRA received | ₹25,000 |
| Rent paid | ₹18,000 |
Salary for HRA = ₹60,000.
| Component | Calculation | Amount |
|---|---|---|
| 1. Actual HRA | as received | ₹25,000 |
| 2. Rent − 10% of salary | 18,000 − 6,000 | ₹12,000 |
| 3. 50% of salary (metro) | 0.5 × 60,000 | ₹30,000 |
Exempt HRA = ₹12,000 (rent − 10% is the limit). Taxable HRA = 25,000 − 12,000 = ₹13,000 per month.
Annualised: exempt ≈ ₹1,44,000, taxable ≈ ₹1,56,000. That annual exempt figure is what you carry into old-regime tax math — not the full ₹3,00,000 of HRA received.
If the same person paid ₹30,000 rent instead, component 2 becomes ₹24,000, and exempt jumps to ₹24,000 (still limited by actual HRA at ₹25,000). Higher rent only helps until you hit another cap.
Metro 50% vs non-metro 40%
Same salary and rent in a non-metro city swaps the third cap from 50% to 40%:
- Metro third cap on ₹60,000 basic → ₹30,000
- Non-metro third cap → ₹24,000
If rent − 10% and actual HRA are both high, that city percentage is often what bites. People who moved from a metro to a smaller city (or the reverse) during the year should not reuse last year's mental math — re-run both city types before claiming.
Old regime only — the new regime does not exempt HRA
This is the decision that matters in FY 2025-26 comparisons:
- Old regime — claim Section 10(13A) exemption; remaining HRA is taxable; also claim 80C, 80D, home loan interest, and so on
- New regime — HRA is fully taxable; you get lower slabs and a ₹75,000 standard deduction instead
A large HRA exemption can tip the old regime ahead. A small one often leaves the new regime cheaper. The only way to know is to compute exempt HRA first, then feed that number into a side-by-side tax comparison — not raw HRA from the payslip.
How to use the calculators together (ITR workflow)
- Open the HRA Exemption Calculator
- Enter basic, DA (if any), HRA received, and rent — all monthly or all annual
- Pick metro or non-metro and read exempt vs taxable HRA (and the three-component breakdown)
- Copy the annual exempt HRA
- Paste it into the HRA / rent-benefit field on the Income Tax Calculator under old-regime deductions
- Compare old vs new tax for your gross income
Both tools run in the browser with no signup. Treat the result as a filing estimate — keep rent receipts and Form 12BB proofs, and get advice if you have partial-year rent, rent paid to a spouse, or other special cases the standard formula does not cover.
Quick checks before you claim
- Every amount is the same period (do not mix monthly rent with annual HRA)
- City type matches where you actually lived and paid rent
- You are opting for the old regime if you want this exemption
- The Income Tax Calculator gets exempt HRA, not full HRA received
Run the numbers on the HRA Exemption Calculator, then finish the regime choice on the Income Tax Calculator. That pairing is the fastest path from payslip + rent receipt to a clear old-vs-new answer this ITR season.
Try it free → www.tinytoolstudio.com/tools/hra-exemption-calculator
Frequently Asked Questions
- How is HRA exemption calculated?
- Take the least of (1) actual HRA from your payslip, (2) rent paid minus 10% of salary for HRA purposes, and (3) 50% of that salary if you live in Delhi, Mumbai, Kolkata, or Chennai, or 40% in any other city. Salary here means basic pay plus dearness allowance that forms part of retirement benefits.
- Can I claim HRA under the new tax regime?
- No. Section 10(13A) HRA exemption is available only if you choose the old tax regime. Under the new regime your HRA is fully taxable, though you still get lower slab rates and a higher standard deduction.
- Which cities count as metro for HRA?
- For this rule, metro means Delhi, Mumbai, Kolkata, and Chennai — the exemption cap is 50% of salary. Every other city uses the 40% non-metro cap.
- Should I enter monthly or annual amounts?
- Either works if every field uses the same period. For ITR and for the Income Tax Calculator's HRA field, you usually want the annual exempt total — monthly inputs × 12, or enter annual figures from the start.
- How does HRA exemption save tax?
- Only the exempt portion is removed from taxable salary under the old regime. The rest of your HRA stays taxable. Larger exemption lowers old-regime taxable income, which can change whether old or new regime wins for the year.