Salary Benefits
9 min read
January 25, 2025
HRA Exemption Calculator & Guide: Save Maximum Tax
Complete guide to House Rent Allowance exemption calculation with examples
Maximize Your Tax Savings
HRA exemption is one of the most significant tax-saving opportunities for salaried employees. Understanding the correct calculation can save you thousands in taxes annually.
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 based on a specific formula, and only the lesser of three amounts is exempt from tax.
HRA Exemption Calculation Formula
Exemption Formula
The LEAST of the following three amounts is exempt from tax
1
Actual HRA Received
Total HRA component in your salary
2
Rent Paid - 10% of Basic Salary
Annual rent minus 10% of your annual basic salary
3
50% or 40% of Basic Salary
Metro: 50% of Basic
Non-Metro: 40% of Basic
Metro cities include Delhi, Mumbai, Kolkata, and Chennai. All other cities are considered non-metro.
Example Calculations: Metro vs Non-Metro
See how the same salary structure results in different exemptions based on city type
Metro City (Mumbai)
50% basic salary limit
Salary Details
Basic Salary₹40,000/month
HRA Received₹20,000/month
Rent Paid₹15,000/month
Calculation (Annual)
1. Actual HRA₹2,40,000
2. Rent - 10% Basic₹1,32,000
(₹1,80,000 - ₹48,000)
3. 50% of Basic₹2,40,000
Exempt: ₹1,32,000 (Lowest of three)
Tax Saved: ~₹40,920 (at 31% tax rate)
Tax Saved: ~₹40,920 (at 31% tax rate)
Non-Metro City (Pune)
40% basic salary limit
Salary Details
Basic Salary₹40,000/month
HRA Received₹20,000/month
Rent Paid₹15,000/month
Calculation (Annual)
1. Actual HRA₹2,40,000
2. Rent - 10% Basic₹1,32,000
(₹1,80,000 - ₹48,000)
3. 40% of Basic₹1,92,000
Exempt: ₹1,32,000 (Lowest of three)
Tax Saved: ~₹40,920 (at 31% tax rate)
Tax Saved: ~₹40,920 (at 31% tax rate)
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 |
Important Note
Keep all documents handy as your employer may request them during salary processing or annual tax filing. Digital copies are acceptable for most employers.
Calculate Your HRA Exemption Now
Use our free calculators to compute your exact tax savings
Common Mistakes to Avoid
- Not keeping proper rent receipts and agreements
- Claiming HRA when living in 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 calculating actual exempt amount