HRA Exemption: How Much of Your Rent Is Tax-Free?
The least of three numbers, and a calculator to find yours.
The three-limb rule
House rent allowance is partly exempt from tax under Section 10(13A), but only in the old regime, and only up to the least of three limbs. The first is the HRA you actually receive. The second is the rent you pay minus 10% of your basic pay. The third is 50% of your basic if you live in Delhi, Mumbai, Kolkata or Chennai, and 40% everywhere else. Your exemption is whichever of those three is smallest, and the rest of your HRA is taxed as normal salary.
The consequence of a least-of-three rule is that one weak limb caps everything. If you pay little or no rent, the second limb collapses and your exemption with it, no matter how generous your HRA. If your HRA component is small, that caps you even when your rent is high. So the number is rarely the one you expect, which is exactly why it is worth calculating rather than assuming.
Work out your exemption
Enter your monthly basic, the HRA on your payslip and the rent you actually pay. The tool annualises them, applies the three limbs, and tells you both your exemption and which limb is binding, so you can see what would actually change it.
Your HRA exemption
Enter your monthly figures. The exemption is the least of three limbs, and this shows which one is holding yours down.
Your exemption is capped by your rent minus 10% of basic pay. The three annual limbs are:
- HRA received: ₹3,00,000
- Rent over 10% of basic: ₹2,40,000
- 50% of basic: ₹3,00,000
Want the full picture? Run your CTC through the calculator to see take-home under both regimes with this exemption applied.
Making it work in your favour
Two practical points follow from the rule. First, you must actually pay rent to claim it, and for rent above ₹1 lakh a year you need the landlord's PAN, so keep receipts and a rent agreement. Second, since the exemption lives only in the old regime, its size is a direct input into the old-versus-new decision: a large HRA exemption is often what tips a metro renter towards the old regime. Compute your take-home under both before you choose.
Reading an actual offer letter right now? Paste it in and we'll pull out the numbers, flag clauses like these automatically, and show your real monthly in-hand.
Decode your offer letter →Frequently asked questions
- How is HRA exemption calculated?
- It is the least of three amounts: the HRA you receive, your rent minus 10% of basic pay, and 50% of basic in a metro or 40% elsewhere. The smallest of the three is exempt; the remainder of your HRA is taxed as salary.
- Can I claim HRA exemption in the new tax regime?
- No. HRA exemption is an old-regime deduction only. Under the new regime your entire HRA is taxable, which is one of the main reasons the old regime can still give a metro renter a higher take-home.
- Do I need to pay rent to claim HRA?
- Yes. The exemption is built on rent actually paid, so with no rent the relevant limb is zero and you get no exemption. For rent above ₹1 lakh a year you also need the landlord's PAN, so keep receipts and an agreement.
Last reviewed August 2026.