How HRA exemption actually works
HRA exemption is a salaried, Old Regime perk under Section 10(13A). You don't get the full HRA tax-free — you get whichever of the three numbers below is smallest. Anything above that is taxed as regular salary.
The three-way check (lowest wins)
Only those four cities count as metro. Bengaluru, Hyderabad, Pune, Gurgaon, Noida, Ahmedabad — all 40%, regardless of what rent looks like there.
Quick worked example
Basic+DA ₹6L, HRA ₹2.4L, rent ₹3L, Mumbai:
- ① ₹2,40,000
- ② ₹3,00,000 − ₹60,000 = ₹2,40,000
- ③ 50% of ₹6L = ₹3,00,000
- Lowest = ₹2,40,000 tax-free. At 30% slab, that's ₹72,000 saved.
Why people miss out on HRA they were entitled to
- Didn't declare rent to employer at the start of the year. If you skip the declaration window, your TDS gets deducted on the full salary. You can still claim it at ITR filing, but you've parked cash with the government for months and the refund cycle is slow.
- No rent receipts. Verbal arrangements, cash payments, no paper trail — at investment-proof submission your finance team will reject the claim and reverse the exemption in Form 16.
- Paying cash without proof. Bank transfer to the landlord is the cleanest record. Cash + handwritten receipts is the combination the IT department picks for scrutiny.
- Landlord PAN missing on rent > ₹1L/year. Without PAN or a signed declaration, the employer typically refuses the exemption.
- Owning a home in the same city you work in and self-occupying it — HRA is disallowed.
Frequently Asked Questions
New Regime vs Old Regime — how do I decide based on HRA?
If your annual rent is meaningful relative to your basic (broadly, rent > ~15% of CTC) and you've got the documents, Old Regime usually wins because HRA + 80C + 80D + home loan interest stack up. If you rent very little or live with family rent-free, New Regime's higher standard deduction (₹75K) and lower slabs usually win. Run both before locking your declaration with payroll.
Can I claim HRA + home loan interest in the same year?
Yes, in specific situations. If you own a home in one city but work and rent in another, you can claim HRA on the rented place and Section 24(b) interest on the owned home (let-out or deemed let-out). Also allowed if you're under construction on your owned house and still renting. Not allowed if you own and self-occupy a house in the same city you work in.
Paying rent to parents — is it allowed?
Yes, but it's the most-audited part of HRA. The property must actually be in the parent's name. Pay rent via bank transfer monthly, not as a lump sum at year-end. Have a written rent agreement. Most importantly, your parent must show the rent as income on their ITR — if they don't, the claim collapses if questioned. Family members in lower slabs make this efficient; family members with zero other income make it cleanest.
What if I didn't declare HRA to my employer?
You can still claim it directly when filing your ITR under Old Regime — fill in the exempt portion under salary income. The downside: TDS was deducted on your full salary all year, so you'll wait for the refund. To avoid this next year, submit Form 12BB with rent details at the start of FY and resubmit rent receipts at investment-proof time.
Which cities count as metro?
Only four: Delhi, Mumbai, Kolkata, Chennai. Everything else is non-metro at 40% — including Bengaluru, Hyderabad, Pune, Gurgaon, Noida, Ahmedabad. The IT Act hasn't been updated despite these cities' size.
Is landlord's PAN mandatory?
Yes, if your annual rent exceeds ₹1 Lakh (₹8,333/month). If the landlord refuses, you need a signed declaration with their name and address. Without one or the other, employer payroll will reject the exemption in Form 16.
I don't get HRA in my salary structure — anything I can claim?
Yes — Section 80GG, capped at ₹60,000/year. Conditions: you don't get HRA, you don't own a house in your city of work, and you actually pay rent. Old Regime only.
Does this calculator save my data?
No. Everything runs in your browser. Nothing is uploaded.