What is HRA?
HRA, or House Rent Allowance, is the part of your salary that your employer pays to help you cover the rent of the home you live in. It is shown as a separate component in your salary slip.
If you live in a rented home and pay rent, part or all of your HRA can be exempt from income tax. Any HRA above the exempt amount is added to your taxable salary.
The HRA exemption is available only in the old tax regime. If you choose the new tax regime, the full HRA is taxable.
Good to know
From FY 2026-27, Bengaluru, Hyderabad, Pune and Ahmedabad count as metro cities for HRA, along with Delhi, Mumbai, Kolkata and Chennai. If you work in one of these eight cities, up to 50% of your salary can be exempt instead of 40%.
What is an HRA Calculator?
An HRA calculator works out how much of your HRA is exempt from tax and how much is taxable, based on your basic salary, dearness allowance, the HRA you receive, the rent you pay and the city you work in.
Why you should use an HRA Calculator?
- Know your tax-free HRA: See exactly how much of your HRA you can claim as exempt when you file your return or submit proofs to your employer.
- Plan your rent: See how the rent you pay affects your exemption, and whether paying more rent would increase it.
- Compare tax regimes: Use the exempt amount to compare your tax under the old and new regimes.
How Does an HRA Calculator Work?
The HRA calculator works on the following inputs:
- Basic Salary: Your yearly basic salary.
- Dearness Allowance: Your yearly DA, if it counts towards retirement benefits. Enter 0 if you don’t receive DA.
- HRA received: The HRA your employer pays you in the year.
- Total rent paid: The rent you pay for the year.
- Metro city: Whether you work in one of the eight metro cities.
The exempt HRA is the lowest of these three amounts, where salary means basic salary plus dearness allowance:
- 1: The HRA you actually receive.
- 2: Rent paid minus 10% of salary.
- 3: 50% of salary in a metro city, or 40% in any other city.
Exempt HRA = Lowest of (HRA, Rent − 10% of Salary, 50% or 40% of Salary)
Taxable HRA = HRA received − Exempt HRA
Formula to Calculate HRA with an Example
Consider an example for a better understanding.
- Basic Salary: ₹5,40,000 a year
- Dearness Allowance: ₹40,000 a year
- HRA received: ₹1,00,000 a year
- Rent paid: ₹3,00,000 a year, in a metro city
Salary is ₹5,40,000 + ₹40,000 = ₹5,80,000. The three amounts are:
HRA received = ₹1,00,000
Rent − 10% of salary = 3,00,000 − 58,000 = ₹2,42,000
50% of salary = ₹2,90,000
The lowest is ₹1,00,000, so the whole HRA is exempt and the taxable HRA is ₹0.
Now take a basic salary of ₹6,00,000 with no DA, HRA of ₹3,00,000 and rent of ₹2,40,000 in a non-metro city. The three amounts are ₹3,00,000, ₹1,80,000 and ₹2,40,000, so ₹1,80,000 is exempt and ₹1,20,000 is taxable.
Things to keep in mind
- Keep rent receipts: Your employer may ask for rent receipts or a rent agreement before allowing the exemption.
- Landlord’s PAN: If your rent is more than ₹1,00,000 a year, you need to give your landlord’s PAN to your employer.
- Rent to parents: You can pay rent to your parents and claim HRA, as long as they own the home, the payment is genuine, and they show it as income.
- No HRA from your employer?: If you pay rent but don’t receive HRA, you may be able to claim a separate deduction for rent instead.