HRA Calculator & Rules — How Much House Rent Allowance is Tax-Free in 2025-26

Last verified: April 2026, against Section 10(13A), Rule 2A of the Income Tax Rules, and CBDT clarifications on rent receipt and landlord-PAN requirements.

House Rent Allowance is the single largest tax-saving lever for salaried Indians who pay rent — and most people claim less than they’re entitled to. The rule isn’t “50% of basic” or “your actual rent” — it’s the lowest of three formulas, and small structural choices in your salary (basic-to-CTC ratio) can swing your annual exemption by ₹50,000–1,50,000.

This guide walks through the FY 2025-26 HRA rules end-to-end: the three-test calculation, what counts as a metro, the rent receipt and landlord-PAN paperwork the I-T Department actually checks, and worked examples for ₹6 L / ₹15 L / ₹30 L salary brackets.

Before going further: HRA exemption is available only under the old tax regime. If you’re picking the new regime (see old vs new tax regime guide), HRA exemption is zero regardless of how much rent you pay.

The HRA exemption formula — lowest of three

Your tax-free HRA for the year is the minimum of:

1. Actual HRA received from your employer in the year
2. Rent paid minus 10% of basic salary for the same period
3. 50% of basic salary (if you live in Mumbai, Delhi, Kolkata, or Chennai) or 40% of basic salary (every other city, including Bangalore, Hyderabad, Pune, Gurugram and Noida)

“Basic salary” for this calculation includes basic + dearness allowance (DA, if part of retirement benefit) + commission as a fixed % of turnover. It excludes all other allowances.

Use our HRA Calculator to plug in your actual numbers — it runs all three tests automatically.

The four metros vs everywhere else

The Income Tax Act lists exactly four cities as “metros” for HRA: Mumbai, Delhi, Kolkata, Chennai. Bengaluru, Hyderabad, Pune, Ahmedabad, Gurugram, Noida, and every other city — even though they’re metropolitan in common usage — count as non-metro at 40% of basic.

This is one of the most common over-claims the I-T Department flags. If you live in Bengaluru and your CA has used 50%, your assessment is at risk.

Worked examples — three salary brackets

Example 1: ₹6 lakh CTC, Bengaluru, ₹15,000/month rent

Assume basic salary = ₹2,40,000/year (40% of CTC), HRA component = ₹1,20,000/year, actual rent paid = ₹1,80,000/year.

• Test 1 — actual HRA: ₹1,20,000
• Test 2 — rent − 10% basic: ₹1,80,000 − ₹24,000 = ₹1,56,000
• Test 3 — 40% of basic (non-metro): ₹96,000

Lowest = ₹96,000 exempt. The remaining ₹24,000 of HRA is taxable. Tax saved at this person’s slab (5%): ₹4,800.

Example 2: ₹15 lakh CTC, Mumbai, ₹40,000/month rent

Basic = ₹6,00,000, HRA = ₹3,00,000, rent = ₹4,80,000.

• Test 1 — actual HRA: ₹3,00,000
• Test 2 — rent − 10% basic: ₹4,80,000 − ₹60,000 = ₹4,20,000
• Test 3 — 50% of basic (Mumbai): ₹3,00,000

Lowest = ₹3,00,000 exempt — the full HRA. Tax saved at 30% slab + cess ≈ ₹93,600.

Notice the trap: this person’s actual rent (₹4.8 L) far exceeds the HRA in their salary structure (₹3 L), so they’re “leaving rent on the table.” A higher HRA component in the salary structure would let them claim more — within the 50% basic ceiling.

Example 3: ₹30 lakh CTC, Delhi, ₹70,000/month rent

Basic = ₹10,80,000 (36% of CTC), HRA = ₹5,40,000, rent = ₹8,40,000.

• Test 1 — actual HRA: ₹5,40,000
• Test 2 — rent − 10% basic: ₹8,40,000 − ₹1,08,000 = ₹7,32,000
• Test 3 — 50% of basic: ₹5,40,000

Lowest = ₹5,40,000. Tax saved at 30% + 10% surcharge + 4% cess ≈ ₹1,75,000.

The basic salary ratio nobody talks about

HRA exemption is capped at 40-50% of basic. So if your CTC is structured with low basic and high allowances (a common HR pattern), your HRA exemption ceiling shrinks too. Two ₹15 L CTCs can have wildly different HRA exemptions:

• Basic 35% of CTC (₹5.25 L): HRA exemption ceiling = ₹2.62 L (50% basic, metro)
• Basic 50% of CTC (₹7.5 L): HRA exemption ceiling = ₹3.75 L (50% basic, metro)

The second structure delivers ₹1.13 L more exemption — worth ~₹35K annual tax savings at 30% slab. It’s worth asking HR whether the salary can be re-structured. Note that higher basic also means higher EPF and gratuity, which most people consider a feature, not a bug. See our take-home calculator guide for how the ratio cascades.

Rent receipts and the landlord-PAN rule

For all rent claims: You need rent receipts (one per month is good practice; one consolidated receipt is acceptable). Receipt must contain landlord name, address, amount, period, signature, and revenue stamp if rent is above ₹5,000 per receipt (paid in cash).

Annual rent above ₹1,00,000: You must furnish the landlord’s PAN to your employer (CBDT Circular No. 8/2013). If the landlord doesn’t have a PAN, a self-declaration in Form 60 from the landlord is required. Both reach the employer at investment-proof submission time, typically January.

Common false belief: “I can claim HRA on rent paid to my parents.” You can — and the I-T Department has accepted this in multiple ITAT rulings — but only if (a) there’s a genuine landlord-tenant relationship, (b) money actually moves to the parent’s bank account, and (c) the parent shows the rent as income in their own return. Cash transfers, post-dated lump sums, and parents who don’t file returns invite scrutiny. Don’t try this without proper paperwork.

Living with spouse who’s the homeowner: You cannot claim HRA on rent paid to your spouse for property they own. The Finance Act 2017 closed this loophole; the I-T Department flags such cases routinely.

What if your employer didn’t include HRA in your CTC?

If your salary doesn’t have an HRA component but you’re paying rent, you can claim a deduction under Section 80GG instead. The amount: lowest of (a) ₹5,000/month, (b) 25% of total income, (c) actual rent − 10% of total income. Maximum ₹60,000/year. Works in old regime only. You must furnish Form 10BA.

This typically applies to self-employed individuals or salaried employees whose HR has skipped HRA in the structure. ₹60K cap means it’s much weaker than full HRA exemption — push your employer to add an HRA line if you’re paying meaningful rent.

HRA + home loan together — yes, you can

If you own a house in one city but live and work in another, you can claim both HRA exemption and home-loan interest deduction (Section 24b). The owned property is treated as let out (or self-occupied with NIL value if not let out), and you’re a tenant in your work city. This is one of the most underused tax stacks for transferred employees.

Even within the same city, the I-T Department has accepted HRA + home loan claims if the owned property is genuinely let out or unfit for occupation — but be ready with documentation.

Common mistakes I-T notices flag

1. Claiming HRA without rent receipts. If your employer didn’t ask for proofs at investment-declaration time, that’s an HR oversight — the I-T Department can still ask for them in a scrutiny.
2. Inflated rent on receipts. Form 26AS now reports rent paid by salaried employees who furnished landlord PAN. Mismatch between your claim and 26AS is a quick red flag.
3. Rent paid in cash above ₹2 L. Section 269ST disallows cash receipts above ₹2 L from a single source — your landlord can be penalised, and your claim sits on shaky ground.
4. HRA in metro rate when you live in non-metro. Bengaluru, Hyderabad, Pune — these are 40%, not 50%.

Linked deep-dives

• Old vs new tax regime — when HRA tips the balance
• Take-home salary calculator — CTC to in-hand pay
• HRA Calculator
• Income Tax Calculator (both regimes)

FAQs

Is HRA available in the new tax regime?

No. HRA exemption under Section 10(13A) is allowed only in the old tax regime. New regime taxpayers cannot reduce taxable income for rent paid.

Can I claim HRA if I live with my parents?

Yes, if you actually pay them rent and they declare it as income. You’ll need rent receipts, evidence of payment (bank transfer is cleanest), and your parent’s PAN if rent exceeds ₹1 L/year. Cash payments and oral arrangements don’t survive scrutiny.

Do I need to submit rent receipts every month?

Practically, employers ask for them at investment-proof time (typically January). The Act doesn’t specify monthly receipts but does require evidence of rent paid. Best practice: one receipt per month, or one quarterly receipt.

What if my landlord refuses to share PAN?

For annual rent above ₹1 L you legally need either the landlord’s PAN or a Form 60 declaration from them. If neither is available, your employer cannot grant HRA exemption in TDS — you’d have to claim refund at filing time, which invites scrutiny. Many landlords in metro markets resist; this is often the practical reason people stay in the new regime.

Can I claim HRA if I work from home in my own city?

If you actually pay rent for accommodation, yes — your work location doesn’t affect HRA eligibility. The exemption is tied to rent paid for residence, not where you work.

Is the rent paid for furniture, security deposit, or maintenance covered?

Only rent for use of the residential accommodation. Maintenance charges paid separately to a society and security deposit (refundable) don’t qualify. Furnished-flat rent that bundles furniture into a single rent figure typically goes through, but break-out maintenance/parking is excluded.

Sources & references

• Income Tax Department — Section 10(13A) and Rule 2A
• CBDT Circular 8/2013 (landlord PAN requirement)
• Finance Act 2017 (spouse-rent disallowance)
• ITAT precedent on rent paid to parents — Bajrang Prasad Ramdharani v. ACIT

Last verified: April 2026. HRA rules are stable and rarely change between budgets, but rent receipt enforcement is tightening — keep clean records.