HRA Calculator

What is HRA (House Rent Allowance)?

HRA or House Rent Allowance is a component of salary provided by employers to employees to meet their rental accommodation expenses. It is one of the most common allowances in Indian salary structures. HRA is partially or fully exempt from income tax under Section 10(13A) of the Income Tax Act, 1961, provided the employee actually pays rent for their residence. HRA exemption is available only under the old tax regime.

How HRA Exemption is Calculated

The HRA exemption is the minimum of the following three amounts:

1. Actual HRA received from the employer.

2. Rent paid minus 10% of (Basic Salary + DA). This ensures only the excess rent over 10% of salary qualifies.

3. 50% of (Basic Salary + DA) if you live in a metro city (Delhi, Mumbai, Chennai or Kolkata), or 40% of (Basic Salary + DA) if you live in a non-metro city.

The lowest of these three amounts is your HRA exemption. The remaining HRA (Actual HRA received minus Exemption) becomes taxable as part of your salary income.

Metro vs Non-Metro Cities

For HRA calculation purposes, only four cities are classified as metro cities: Delhi, Mumbai, Chennai and Kolkata. If you live in any of these cities, you get a higher exemption limit of 50% of (Basic + DA). All other cities including Bangalore, Hyderabad, Pune and others are considered non-metro, where the limit is 40% of (Basic + DA).

How to Claim HRA Exemption

To claim HRA exemption, you need to submit rent receipts to your employer. If the annual rent exceeds Rs. 1,00,000, you must also provide the landlord's PAN number. Self-employed individuals cannot claim HRA but can claim deduction under Section 80GG for rent paid. HRA exemption is not available under the new tax regime introduced in Budget 2020.

Frequently Asked Questions

Can I claim HRA if I pay rent to my parents?

Yes, you can claim HRA exemption by paying rent to your parents, provided they own the house and you have a valid rent agreement. The rent paid will be treated as income in your parents' hands.

Is HRA exemption available under the new tax regime?

No, HRA exemption under Section 10(13A) is not available if you opt for the new tax regime. You can only claim HRA benefits under the old tax regime.

What if I own a house and also pay rent?

If you own a house in one city but live on rent in another city due to employment, you can claim both HRA exemption on rent paid and home loan interest deduction under Section 24. However, you cannot claim HRA if you live in your own house.