HRA Exemption Calculator: How to Save Tax on House Rent
Complete guide to HRA calculation with examples and proof requirements
- Exemption Formula: LEAST of (1) Actual HRA, (2) Rent minus 10% basic, (3) 50% basic (metro) or 40% basic (non-metro)
- Available Under: Old tax regime only - not in new regime
- PAN Requirement: Landlord PAN mandatory if rent exceeds Rs 1 lakh/year
- Rent to Parents: Allowed - deductible for you, taxable for them (usually lower bracket)
- No HRA in Salary? Claim under Section 80GG (up to Rs 5,000/month)
What is HRA Exemption?
House Rent Allowance (HRA) is a component of salary that provides tax exemption on rent paid. Even if you don't own a house at your place of work, you can claim HRA exemption under the old tax regime.
The exemption amount is calculated on a specific formula, and only the least of three amounts is exempt from tax.
HRA Exemption Calculation Formula
hra_exemption.formula
least of 3- 01 ·
Actual HRA Received
Total HRA component in your salary
- 02 ·
Rent Paid − 10% of Basic Salary
Annual rent minus 10% of your annual basic salary
- 03 ·
50% or 40% of Basic Salary
50% of basic for metro cities, 40% for non-metro
Metro cities include Delhi, Mumbai, Kolkata, and Chennai. All other cities are considered non-metro.
Example: Metro vs Non-Metro
The same salary structure yields different exemptions based on city type.
Metro · Mumbai
50% basic₹1,32,000
Tax saved ~₹40,920 (at 31% tax rate)
Non-Metro · Pune
40% basic₹1,32,000
Tax saved ~₹40,920 (at 31% tax rate)
Parent Rent Strategy: You can pay rent to your parents and claim HRA exemption - completely legal. Your parents declare the rent as income (usually in a lower tax bracket). Just ensure: (1) proper rent agreement, (2) transfer rent via bank, (3) parents show income in ITR. Use our HRA Exemption Calculator to see your exact savings.
Documents Required for HRA Claim
| Status | Document | When Required |
|---|---|---|
Rent Receipts | All cases | |
Rent Agreement / Lease Deed | All cases | |
Landlord's PAN Card | If annual rent exceeds ₹1,00,000 | |
Self-Declaration (No PAN) | If landlord doesn't have PAN |
Calculate Your HRA Exemption
- Not keeping proper rent receipts and agreements
- Claiming HRA when living in your own house (not allowed)
- Forgetting to submit landlord's PAN for rent above ₹1 lakh/year
- Not considering HRA exemption while choosing between old and new tax regime
- Claiming full HRA instead of the actual exempt amount
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