House Rent Allowance (HRA) is a common component of salaried employees' compensation in India. Under Section 10(13A) of the Income Tax Act, a portion of HRA received can be exempt from income tax if you live in rented accommodation. The exemption reduces your taxable salary, potentially saving significant tax depending on your rent, salary, and city of residence.
HRA exemption is calculated as the minimum of three conditions: (1) the actual HRA received from your employer, (2) rent paid minus 10% of your basic salary plus dearness allowance, and (3) 50% of basic salary plus DA if you live in a metro city, or 40% for non-metro cities. Metro cities in India include Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, and Pune as per common tax practice.
To claim HRA exemption, you must actually pay rent and maintain proof such as rent receipts or a rental agreement. If you live in your own house or your rent is very low relative to your salary, the exempt amount may be zero or minimal. Our calculator shows all three conditions side by side and highlights which one applies as the minimum.
For example, if your basic salary is ₹50,000 per month, you receive ₹20,000 HRA, pay ₹18,000 rent, and live in Mumbai (metro), the three conditions are: ₹20,000 (actual HRA), ₹13,000 (₹18,000 − 10% of ₹50,000), and ₹25,000 (50% of basic). The minimum is ₹13,000, so ₹13,000 is exempt monthly and ₹7,000 is taxable HRA. Use this calculator to optimize your tax planning before submitting Form 12BB to your employer.