How HRA exemption works
Under the old regime, the tax-free part of your HRA is the lowest of three amounts:
- the HRA you received
- rent paid minus 10% of your salary
- 50% of your salary in a metro city, or 40% elsewhere
"Salary" here means basic pay, plus DA if it counts for retirement benefits, plus any commission paid as a fixed share of turnover.
Which cities count as metros
| City | FY 2025-26 | FY 2026-27 |
|---|---|---|
| Mumbai, Delhi, Kolkata, Chennai | 50% | 50% |
| Bengaluru, Hyderabad, Pune, Ahmedabad | 40% | 50% |
| Every other place (Gurugram and Noida, for example, aren't on the list) | 40% | 40% |
Example: Bengaluru
Basic ₹60,000 a month, HRA ₹30,000, rent ₹35,000, for the full year.
| The least of | FY 2025-26 | FY 2026-27 |
|---|---|---|
| HRA received | ₹3,60,000 | ₹3,60,000 |
| Rent minus 10% of salary | ₹3,48,000 | ₹3,48,000 |
| 40% or 50% of salary | ₹2,88,000 | ₹3,60,000 |
| Tax-free HRA | ₹2,88,000 | ₹3,48,000 |
₹60,000 more of HRA becomes tax-free in a year. In the 30% slab, that's about ₹18,720 less tax, with cess.
Good to know
- HRA exemption is available only under the old regime.
- If your total rent for the year is over ₹1 lakh, your employer needs your landlord's PAN.
- You can pay rent to your parents if they own the house and show the rent as their income. Rent paid to a spouse is usually not accepted.
Work out your tax-free HRA in a minute.
Open the HRA calculatorSources
- Income-tax Rules, 2026 (Notification 22/2026), Central Board of Direct Taxes
- Tax rules for salaried individuals, AY 2026-27, Income Tax Department
This guide explains the rules in general. For your own situation, .