HRA Calculator – House Rent Allowance Exemption
🏠 What is HRA?
House Rent Allowance (HRA) is a salary component paid by employers to employees to help cover rental accommodation costs. Under the Old Tax Regime, a portion of HRA is exempt from income tax, reducing your overall tax liability if you live in rented accommodation.
📈 HRA Exemption Calculation — The 3-Rule Method
HRA exemption is the minimum of these three amounts:
- Actual HRA received from employer
- Rent paid minus 10% of basic salary (annual)
- 50% of basic salary (metro cities) or 40% of basic salary (non-metro cities)
| Rule | Formula |
|---|---|
| Rule 1 | Annual HRA Received |
| Rule 2 | Annual Rent Paid − (10% × Annual Basic Salary) |
| Rule 3 | 50% × Annual Basic (Metro) or 40% × Annual Basic (Non-Metro) |
📄 Documents Required for HRA Claim
- Rent receipts: Monthly receipts signed by landlord with revenue stamp for cash payments above Rs. 5,000
- Rental agreement: Copy of lease agreement showing rent amount and duration
- Landlord PAN: Mandatory if annual rent exceeds Rs. 1,00,000 (Rs. 8,333/month)
- Bank statement: Proof of rent payment via bank transfer (recommended over cash)
📝 Worked Examples
Example 1: Metro City
Basic: ₹40,000/month, HRA: ₹20,000/month, Rent: ₹18,000/month, City: Mumbai
- Rule 1: ₹20,000 × 12 = ₹2,40,000
- Rule 2: (₹18,000 × 12) − (10% × ₹40,000 × 12) = ₹2,16,000 − ₹48,000 = ₹1,68,000
- Rule 3: 50% × ₹40,000 × 12 = ₹2,40,000
- HRA Exempt = Minimum(2,40,000, 1,68,000, 2,40,000) = ₹1,68,000
Example 2: Non-Metro City
Basic: ₹30,000/month, HRA: ₹12,000/month, Rent: ₹10,000/month, City: Pune
- Rule 1: ₹12,000 × 12 = ₹1,44,000
- Rule 2: (₹10,000 × 12) − (10% × ₹30,000 × 12) = ₹1,20,000 − ₹36,000 = ₹84,000
- Rule 3: 40% × ₹30,000 × 12 = ₹1,44,000
- HRA Exempt = Minimum(1,44,000, 84,000, 1,44,000) = ₹84,000
💡 Tips to Maximize HRA Benefit
- Choose Old Regime if renting: If HRA exemption plus other deductions exceed the New Regime tax savings, Old Regime wins
- Keep rent above 10% of basic: Rule 2 only gives benefit if rent exceeds 10% of your basic salary
- Submit proof early: Submit rent receipts to HR before January to get HRA exemption reflected in your monthly TDS, avoiding a large refund claim later
- Consider paying rent to family: If genuinely renting from parents, you can claim HRA exemption while parents show rental income (may be tax-neutral if parents are in lower tax bracket)
Related Calculators
⚖ HRA Impact — New Regime vs Old Regime Decision
Since HRA exemption only applies under Old Regime, deciding whether to claim it requires comparing your total tax outcome under both regimes, not just the HRA benefit in isolation.
| Monthly Rent | Approx Annual HRA Exempt | Tax Saved (30% bracket) |
|---|---|---|
| ₹10,000 | ~₹72,000 | ~₹21,600 |
| ₹20,000 | ~₹1,68,000 | ~₹50,400 |
| ₹30,000 | ~₹2,40,000 | ~₹72,000 |
| ₹50,000 | ~₹3,60,000 (capped by Rule 3) | ~₹1,08,000 |
📌 Special HRA Cases and Exceptions
Working in a Different City Than Family
If you rent accommodation for work purposes in a city different from where your family lives (in a house you own), you can still claim HRA exemption for the rented accommodation, provided you meet the standard three-rule test.
Multiple Rented Properties
HRA exemption applies only for accommodation where you actually reside for employment purposes. You cannot claim HRA for a second home or investment property where you don’t live.
Rent Exceeding Salary Component
If actual rent paid significantly exceeds your HRA component, the exemption is still capped by the three-rule minimum — you cannot claim more than what the formula allows, even if you’re genuinely paying higher rent.
No HRA Component in Salary
If your salary structure doesn’t include HRA as a separate component, you may still claim rent-related deduction under Section 80GG (up to ₹60,000/year), subject to specific conditions including not owning any residential property in the city of employment.