Updated for FY 2026-27 (AY 2027-28) · 8 metro cities now at 50% · Income Tax Act 2025
HRA Exemption Calculator
Find exactly how much of your House Rent Allowance is tax-free — with the new FY 2026-27 rule that makes Bengaluru, Pune, Hyderabad and Ahmedabad 50% metro cities. See which limit caps you and what it saves in tax.
8 metro cities at 50% (new rule).
Enter everything per month.
Usually ₹0 for private-sector employees.
Metro for FY 2026-27 → 50% of salary applies.
Bengaluru became an HRA metro city from FY 2026-27 — you now get 50% (up from 40%).
Tax-free HRA (FY 2026-27)
₹1,20,000
₹1,20,000 of your HRA is taxable. At a 30% slab, the exemption saves you about ₹36,000 in tax.
Your exemption is the least of these three:
Your exemption is capped by your rent. Paying more rent (up to the 50% ceiling) increases how much is exempt — this is the lever most people can actually move.
HRA is exempt only under the old tax regime. If you're on the new (default) regime, your entire ₹2,40,000 HRA is fully taxable. Compare both regimes →
For FY 2026-27 (AY 2027-28). HRA exemption under Section 10(13A) and Rule 2A is the least of: actual HRA, rent minus 10% of salary, and 50% (metro) / 40% (non-metro) of salary, where salary = basic + DA + turnover commission. From FY 2026-27 the metro list expands to 8 cities (adds Bengaluru, Pune, Hyderabad, Ahmedabad) under the new Income Tax Act 2025; FY 2025-26 keeps the old four. HRA is available only under the old regime. You also need a valid rent agreement, and your landlord's PAN if annual rent exceeds ₹1,00,000. General information, not tax advice — confirm at incometax.gov.in.
How HRA exemption actually works
House Rent Allowance is part of most salary packages, but it isn't automatically tax-free — only the portion that clears a specific formula escapes tax. Under Section 10(13A) read with Rule 2A, your exempt HRA is the least of threefigures: the actual HRA your employer pays, your rent minus 10% of salary, and 50% of salary (metro) or 40% (non-metro). "Salary" here means basic pay plus dearness allowance and any commission fixed as a percentage of turnover — not your whole CTC. Whatever survives is tax-free; the balance is added back to your taxable salary. The calculator above runs all three caps and tells you which one is holding your exemption back.
The FY 2026-27 change: 8 metro cities now get 50%
This is the update most calculators haven't caught up with. For decades, only Delhi, Mumbai, Kolkata and Chennaicounted as "metro" for HRA, giving residents the higher 50%-of-salary ceiling, while every other city — including Bengaluru and Hyderabad — was capped at 40%. From FY 2026-27 (AY 2027-28), under the new Income Tax Act 2025, the metro list expands to eight cities: the original four plus Bengaluru, Pune, Hyderabad and Ahmedabad. For a professional in one of those four, the exemption ceiling jumps from 40% to 50% of salary — often several thousand rupees of extra tax-free income a year. The catch: it only applies from FY 2026-27. If you're still filing your FY 2025-26 return, those cities remain non-metro, which is why the calculator lets you switch the year.
HRA only works under the old regime
Here's the trap that quietly costs people the most. The HRA exemption exists only under the old tax regime. Because the new regime is now the default, if you don't actively choose the old regime your entire HRA is taxed — exemption gone. That doesn't automatically mean the old regime wins: the new regime has lower slab rates and a bigger standard deduction, so the right answer depends on your full set of deductions (HRA plus 80C, 80D, home-loan interest and the rest). The honest way to decide is to compare your total tax both ways — which is exactly what our Old vs New Regime calculator does.
Rent to parents, home loans, and the paperwork
A few practical points decide whether your claim holds up. You can pay rent to your parents and claim HRA, as long as they own the home, you actually transfer the rent, and they report it as income. You can also claim HRA and a home-loan deduction together — for instance if you rent in your work city while paying a loan on a house elsewhere. And keep the paperwork tight: a rent agreement, rent paid through bank transfer, and your landlord's PAN if annual rent exceeds ₹1,00,000. From FY 2026-27 the rules also ask you to disclose your relationship with the landlord (via Form 124) when you pay rent to family, so a genuine, documented arrangement matters more than ever.
Worked example: ₹6L basic, ₹2.4L HRA, ₹1.8L rent in Bengaluru
The setup. Priya works in Bengaluru, earning a basic salary of ₹6,00,000 a year (no DA), receives ₹2,40,000 of HRA, and pays ₹1,80,000in annual rent. We'll run it for FY 2026-27, when Bengaluru is a metro city.
The three caps. (1) Actual HRA received = ₹2,40,000. (2) Rent minus 10% of salary = ₹1,80,000 − ₹60,000 = ₹1,20,000. (3) 50% of salary (Bengaluru is now metro) = ₹3,00,000. The least of the three is ₹1,20,000, so that much of her HRA is tax-free and the remaining ₹1,20,000 is taxable.
What the new rule changed.Had this been FY 2025-26, Bengaluru would still be non-metro, so cap (3) would be 40% = ₹2,40,000 — but since cap (2) of ₹1,20,000 is still the smallest, Priya's exemption is the same ₹1,20,000 here. The metro upgrade only helps when the 50%/40% ceiling is the binding limit (typically high earners paying high rent). At a 30% slab, her ₹1,20,000 exemption saves about ₹36,000 in tax — but only if she files under the old regime. Change any input above and the verdict, the binding cap and the tax saving all update live.
Frequently asked questions
How do I calculate my HRA exemption?
Your tax-free HRA is the least of three amounts: (1) the actual HRA your employer pays you, (2) the rent you pay minus 10% of your salary, and (3) 50% of your salary if you live in a metro city or 40% if non-metro — where 'salary' means basic pay plus dearness allowance (and any turnover-based commission). Whichever of the three is smallest is exempt; the rest of your HRA is added back to taxable income. The calculator above does this instantly and highlights which of the three is capping you, so you know whether paying more rent would actually help.
What is the new HRA rule for FY 2026-27?
The big change is the metro-city list. Until FY 2025-26, only Delhi, Mumbai, Kolkata and Chennai qualified for the higher 50%-of-salary limit, and everyone else got 40%. From FY 2026-27 (AY 2027-28), under the new Income Tax Act 2025, four more cities — Bengaluru, Pune, Hyderabad and Ahmedabad — are reclassified as metros and now get 50%, a meaningful increase for salaried professionals in those hubs. The formula itself is unchanged. Note this applies from FY 2026-27 onwards; if you're filing your FY 2025-26 return (due July 2026), those four cities are still treated as non-metro at 40%.
What is 50% / 40% of salary in HRA exemption?
It's the third cap in the HRA formula and the one tied to where you live. If your home is in a metro city you can exempt up to 50% of your salary (basic + DA); in a non-metro city the ceiling is 40%. So on a ₹6,00,000 basic salary, the metro ceiling is ₹3,00,000 and the non-metro ceiling is ₹2,40,000 — but remember this is only one of three limits, and your actual exemption is the smallest of the three. From FY 2026-27 the metro 50% list grows from 4 to 8 cities.
What is the maximum HRA exemption I can claim?
There's no fixed rupee maximum — it's whatever the least-of-three formula produces for your numbers. In practice the cap is usually either your actual HRA or your rent minus 10% of salary, and it can never exceed 50% (metro) or 40% (non-metro) of your salary. To maximise it you generally want a higher HRA component in your salary structure and rent that's at least 10% of salary above your HRA-or-ceiling limit. The calculator shows your exact maximum and which lever is binding.
Can I claim HRA if I live with my parents?
Yes. If you live in a home owned by your parents and genuinely pay them rent, you can claim HRA exemption on it. The conditions: your parents must own the property, you should have a rent agreement and pay through a traceable banking channel, and your parents must declare that rent as income in their own tax returns. Done properly it's a legitimate, common way to claim HRA — but it must be a real arrangement, not a paper one, and you'll need your parent's PAN if the annual rent crosses ₹1,00,000.
Can I claim HRA under the new tax regime?
No. The HRA exemption under Section 10(13A) is available only under the old tax regime. Since the new regime is now the default, many salaried people are surprised to find their entire HRA becomes taxable if they don't actively opt for the old regime. Whether claiming HRA is worth choosing the old regime depends on your full deduction picture — HRA plus 80C, 80D, home-loan interest and so on. Use our Old vs New Tax Regime calculator to see which leaves you with more in hand after accounting for your HRA.
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