How is HRA exemption calculated?

Last reviewed: 27 Oct 2026 · Noema Research · 4 min read

Many salaried renters assume all their HRA is exempt. Only the smallest of three amounts is exempt: the HRA you receive, rent paid minus 10% of basic + DA, and 50% of basic + DA in Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune or Ahmedabad (40% elsewhere). The rest of your HRA is taxed as salary. The exemption applies only under the old tax regime. Rules checked 27 Oct 2026.

Example values

Basic + DA (₹ a year)HRA received (₹ a year)Rent paid (₹ a year) I live in one of the eight 50% cities

Your estimate

₹1,80,000 a year exempt

Smallest of ₹2,40,000, ₹1,80,000, ₹3,00,000.

₹60,000 of HRA is taxed as salary. Old regime only.

Estimates, not predictions.

Create an account to map this answer against your salary allocation.

The three way formula

The rule looks like one number but is really three limits. The exemption is the smallest of HRA received; rent paid minus 10% of basic + DA; and 50% of basic + DA in the eight listed cities, 40% elsewhere.

HRA exemption limits, Tax Year 2026 to 27. Rules checked 27 Oct 2026.
Limit	How to work it out
1	HRA actually received
2	Rent paid minus 10% of basic + DA
3	50% of basic + DA in Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad; 40% elsewhere

What counts as salary

Using gross salary in the formula overstates the exemption. Salary here means basic plus DA that counts for retirement benefits, plus commission fixed as a share of turnover. Allowances, bonus and perquisites are left out.

A worked example in rupees

Rohan earns basic + DA of ₹6,00,000 a year in Pune, gets HRA of ₹2,40,000 and pays rent of ₹20,000 a month, ₹2,40,000 a year. Limit 1 is ₹2,40,000. Limit 2 is ₹2,40,000 minus ₹60,000, which is ₹1,80,000. Limit 3 is 50% of ₹6,00,000, which is ₹3,00,000. His exemption is ₹1,80,000, and ₹60,000 of HRA is taxed. Estimates, not predictions.

HRA exemption for ₹6,00,000 basic + DA, ₹2,40,000 HRA, eight city rule. Estimates, not predictions.
Monthly rent	Limit 1	Limit 2	Limit 3	Exempt
₹12,000	₹2,40,000	₹84,000	₹3,00,000	₹84,000
₹20,000	₹2,40,000	₹1,80,000	₹3,00,000	₹1,80,000
₹30,000	₹2,40,000	₹3,00,000	₹3,00,000	₹2,40,000

The eight 50% cities

Older guides list only four metros. From Tax Year 2026 to 27, the 50% limit applies in Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad; all other places use 40%.

Old regime only

The new regime does not allow the HRA exemption, so the full HRA is taxed as salary. Check your break even before choosing.

HRA and a home loan

You can claim HRA where you rent and interest on a home loan for a home you own elsewhere that is not let out, under the old regime. The full worked comparison is on the old vs new regime page.

Common mistakes

Using gross salary instead of basic + DA.
Using the four city list when you live in Bengaluru, Hyderabad, Pune or Ahmedabad.
Claiming HRA under the new regime.
Paying rent without receipts or the landlord's PAN where rent is high.
Splitting your salary without checking the HRA share.

FAQ

How is HRA exemption calculated?+

It is the smallest of HRA received, rent paid minus 10% of basic + DA, and 50% of basic + DA in the eight listed cities (40% elsewhere).

Which cities get the 50% HRA limit?+

From Tax Year 2026 to 27: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. All other places use 40%.

Can I claim HRA in the new tax regime?+

No. The HRA exemption is available only under the old regime.

Can I claim HRA and home loan interest together?+

Yes, under the old regime, if you rent where you work and own a home elsewhere that is not let out. See the old vs new regime page for a worked example.