How is HRA exemption calculated?
The tax-free part of house rent allowance is the lowest of three amounts: the actual HRA received, rent paid minus 10% of salary, and 50% of salary in a metro city or 40% elsewhere. Salary here means basic pay plus dearness allowance that counts for retirement benefits, plus any commission paid as a fixed percentage of turnover. The exemption is available only under the old tax regime. FixDoks's HRA Calculator shows all three amounts and picks the lowest.
HRA Calculator at a glance
| Inputs | Basic salary, DA, commission, HRA received, rent paid, city type |
|---|---|
| Output | Exempt HRA, taxable HRA, the three limits |
| Applies to | Old tax regime only |
| Processing | In your browser; your files are not uploaded |
| Price | Free |
| Works on | Chrome, Edge, Safari and Firefox on Windows, Mac, Android and iPhone |
How to use HRA Exemption Calculator
- Enter your monthly basic salary, plus DA that counts for retirement benefits and any commission paid as a fixed share of turnover.
- Enter the HRA your employer pays and the rent you pay each month.
- Choose 50% city if you live in a metro city named in the Income-tax Rules, or 40% city for anywhere else.
- Read the tax-free HRA for the year and the taxable balance. The table shows which of the three limits applied.
The three HRA limits
If your salary includes house rent allowance and you live in rented accommodation, part of the HRA can be tax free under the old tax regime. The exempt amount is the lowest of:
- The actual HRA you received.
- Rent paid minus 10% of salary.
- 50% of salary if you live in a metro city named in the Income-tax Rules, or 40% of salary anywhere else.
Whatever HRA is left after the exemption is added to your taxable salary. The new tax regime, which is the default, does not allow this exemption at all. If you use the new regime, all of your HRA is taxable.
What "salary" means for HRA
Salary for the HRA rules is not your gross pay. It is:
- basic salary,
- plus dearness allowance, but only if it counts for retirement benefits,
- plus commission, but only if it is a fixed percentage of the turnover you achieve.
Other allowances, bonuses and perquisites are left out. Using gross pay by mistake makes the 10% and 50% limits look bigger than they are.
Worked example
Basic salary ₹50,000 a month, no DA, HRA ₹20,000, rent ₹18,000, living in a 50% city:
- Actual HRA: ₹20,000
- Rent minus 10% of salary: ₹18,000 minus ₹5,000 = ₹13,000
- 50% of salary: ₹25,000
The lowest is ₹13,000 a month, so ₹1,56,000 a year is tax free and ₹84,000 a year of HRA is taxable. In a 40% city the third limit is ₹20,000, so the answer is the same here: the rent limit decides it. Paying more rent raises the exemption only until another limit becomes the lowest.
Which cities count for 50%?
Mumbai, Delhi, Kolkata and Chennai have long been the metro cities for the 50% limit. The Income-tax Rules, 2026 set the list for tax year 2026-27 onwards, so check the current rules or ask your employer's payroll team whether your city qualifies before you claim 50%.
Practical points
- Keep proof of rent: employers usually ask for rent receipts or a rent agreement before they allow the exemption in your salary. Keep them for the whole year.
- Part of the year: if your rent, HRA or city changed during the year, work out each period separately and add them up. The calculator works month by month, so run it once for each period.
- Old or new regime: the exemption only helps if the old regime gives you lower tax overall. Compare both with the income tax calculator.
Results are estimates for planning. Your employer, bank, fund or the tax department may round differently or apply other rules, so check the final figure with them.