What HRA exemption really means
House Rent Allowance (HRA) is a part of your salary meant to cover the rent you pay. The good news: a portion of it is exempt from tax under Section 10(13A), so you don't pay tax on that slice. The catch for FY 2025-26 is that this exemption exists only in the old tax regime. Choose the new regime and your entire HRA is taxable, because the new regime trades away deductions for lower slab rates.
HRA only helps if you file under the old regime. Before you count on it, run both sides in the tax calculator — for many renters the old regime wins precisely because of HRA, while for others the new regime's lower rates still come out ahead. See the full trade-off on old vs new tax regime.
The HRA exemption formula
Your exempt HRA is the lowest of these three amounts:
| # | Amount to compare |
|---|---|
| 1 | Actual HRA received from your employer |
| 2 | Rent paid minus 10% of basic salary |
| 3 | 50% of basic salary (metro city) or 40% of basic salary (non-metro) |
"Basic salary" here means basic pay plus dearness allowance (if it forms part of retirement benefits). The four metro cities for this rule are Delhi, Mumbai, Kolkata and Chennai — everywhere else counts as non-metro at 40%.
A worked example
Suppose Anjali works in Mumbai (a metro) with a basic salary of ₹6,00,000 a year, receives ₹2,40,000 of HRA, and pays ₹3,00,000 in annual rent. The three figures are:
- Actual HRA: ₹2,40,000
- Rent − 10% of basic: ₹3,00,000 − ₹60,000 = ₹2,40,000
- 50% of basic (metro): ₹3,00,000
The lowest is ₹2,40,000, so Anjali's entire HRA is exempt. Her taxable salary drops by ₹2,40,000 — a real saving, but again, only if she files under the old regime. You can plug this figure straight into the "HRA / other exemptions" box in the calculator to see the effect on her tax.
Who can claim it
- Salaried employees whose salary structure includes an HRA component and who actually pay rent.
- You must not own and live in the same house — HRA is for rented accommodation you occupy.
- Rent receipts are needed, and if your annual rent crosses ₹1,00,000 you must report your landlord's PAN.
- You can claim HRA and Section 80C and home loan interest together, as long as each condition is genuinely met.
If you don't receive HRA — for example you're self-employed or your salary has no HRA head — you may instead claim a rent deduction under Section 80GG, subject to its own limits. It's narrower than HRA but worth knowing about.
HRA vs the new regime standard deduction
Renters often ask whether losing HRA under the new regime is a deal-breaker. Not always. The new regime gives a larger standard deduction of ₹75,000 and much gentler slab rates, so the maths depends on how large your HRA and other old-regime deductions are. The only reliable answer is your own numbers — enter them once and compare.
Related reading
Frequently asked questions
Can I claim HRA exemption under the new tax regime?
No. HRA exemption is available only under the old tax regime. The new regime does not allow it, though it charges lower slab rates in return.
How is HRA exemption calculated?
Your exemption is the lowest of three figures: the actual HRA received, rent paid minus 10% of basic salary, and 50% of basic salary in a metro city (40% in a non-metro).
Can I claim HRA if I live in my own house?
No. HRA exemption requires that you actually pay rent for accommodation you occupy. If you own and live in the home, you cannot claim it, though you may claim home loan interest instead.
Do I need rent receipts to claim HRA?
Yes. Employers ask for rent receipts, and if annual rent exceeds ₹1,00,000 you must also give your landlord's PAN.