In short
House rent allowance (HRA) is part of many Indian salaries. If you live in rented housing and choose the old tax regime, part of it is exempt from income tax. The exempt amount is the lowest of three figures, and from 1 April 2026 eight cities, not four, get the higher 50% limit.
The three limits
The exemption is the lowest of: the HRA you actually receive; the rent you pay minus 10% of your salary; and 50% of your salary if you rent in one of the eight listed cities, or 40% anywhere else.
Salary here means basic pay plus dearness allowance (when DA counts for retirement benefits) and any commission paid as a fixed percentage of turnover. Other allowances and bonuses do not count.
Eight cities at 50% from April 2026
Until 31 March 2026 only Delhi, Mumbai, Kolkata and Chennai had the 50% limit. From FY 2026-27 Bengaluru, Hyderabad, Pune and Ahmedabad are added. If you rent in one of these four, your exemption may be higher than last year.
Worked example
Basic salary ₹50,000 a month, HRA ₹25,000 a month, rent ₹20,000 a month in Bengaluru. Per year: HRA received ₹3,00,000; rent above 10% of salary ₹2,40,000 − ₹60,000 = ₹1,80,000; 50% of salary ₹3,00,000. The lowest is ₹1,80,000, so that much is exempt and ₹1,20,000 of the HRA is taxed.
With a rent of ₹30,000 all three figures are ₹3,00,000 and the whole HRA is exempt.
What you need
You must actually pay rent for the home you live in, and keep rent receipts or bank records and the rent agreement for your employer. If the rent is more than ₹1 lakh a year you must give your landlord's PAN.
If you pay more than ₹50,000 a month, you have to deduct 2% tax (TDS) from the rent and pay it to the government.
Frequently asked questions
Can I claim HRA in the new tax regime?
No. The HRA exemption exists only in the old regime. In the new regime the whole HRA is taxed, but the rates are lower. Use our income tax calculator to compare the two with your exempt HRA entered as a deduction.
Which cities get the 50% limit?
From 1 April 2026: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Everywhere else the limit is 40% of salary. What counts is where the home you rent is, not where your employer is. Neighbouring cities such as Gurugram, Noida, Thane or Navi Mumbai are normally treated as 40%.
Can I pay rent to my parents?
Yes, if they own the home, you really pay them rent, and they declare it as income in their own tax return. Keep a rent agreement and pay by bank transfer. From April 2026 the form you give your employer also asks how you are related to your landlord. Rent paid to your spouse is not barred by law, but tax officers often challenge it.
Can I claim HRA and a home-loan deduction together?
Yes, when both are real: for example you own a flat in one city, or one that is still being built or is let out, and you rent where you work.
What if I pay rent but get no HRA?
Then there is no HRA to exempt. The old regime has a separate, smaller deduction for rent paid by people who receive no HRA, of at most ₹5,000 a month, for people who do not own a home where they live.
What if my rent or salary changes during the year?
The exemption is worked out for each period separately. Run the calculator once for each period and add up the monthly figures.
Methodology
Per year: (1) HRA received = monthly HRA × 12; (2) rent above 10% of salary = (monthly rent − 10% × monthly salary) × 12, not below zero; (3) city limit = 50% or 40% of monthly salary × 12. Exempt HRA is the lowest of the three; taxable HRA is the HRA received minus the exempt amount. Assumes the same salary, HRA, rent and city for all twelve months.
This calculator gives estimates for information only and is not tax advice. Your employer works out the actual exemption from your documents; check with the Income Tax Department or a tax adviser if in doubt.
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