HRA Exemption: How to Calculate and Claim Tax Benefit

What is HRA?

House Rent Allowance (HRA) is a component of your salary provided by your employer to cover rental expenses. The amount exempt from income tax is calculated using three limits — the lowest of the three is your HRA exemption.

The Three-Formula Method

Your HRA exemption is the minimum of:

1. Actual HRA received from employer

2. Rent paid minus 10% of basic salary (Rent paid − 10% × Basic)

3. 50% of basic salary (for metros: Delhi, Mumbai, Chennai, Kolkata) OR 40% of basic salary (non-metro cities)

Example Calculation

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Calculation:

1. Actual HRA = ₹25,000

2. Rent − 10% of basic = ₹22,000 − ₹6,000 = ₹16,000

3. 40% of basic = ₹24,000

HRA exemption = min(₹25,000, ₹16,000, ₹24,000) = ₹16,000/month

Annual HRA exemption = ₹16,000 × 12 = ₹1,92,000

Important Points

You must be actually paying rent — rent to parents is allowed if they own the property

Rent receipts and the landlord's PAN (if rent > ₹1 lakh/year) are required

HRA is not available if you own a home in the same city where you work

Under the new tax regime, HRA exemption is not available

Calculate your exact exemption with the HRA Calculator.