How to Calculate HRA Exemption (India) — The Minimum-of-Three Rule

Guides · Calculator · Updated 2026

House Rent Allowance (HRA) can save you a significant amount of tax — but only if you pay rent and understand the calculation. The Income Tax Act uses a specific “minimum of three” rule to determine how much of your HRA is exempt. This article explains the rule, walks through a real‑world example, and shows how to claim the exemption correctly with rent receipts and PAN.

The HRA exemption formula

To find your exempt HRA, compute these three values and take the lowest:

Rule A: Actual HRA received from your employer.
Rule B: Rent paid minus 10% of your basic salary + DA.
Rule C: 50% of basic + DA if you live in a metro city (Delhi, Mumbai, Kolkata, Chennai), otherwise 40%.

Exempt HRA = Minimum (Actual HRA, Rent − 10% Basic, 50/40% of Basic)

Any HRA amount above the exempt portion becomes taxable and is added to your salary income.

Step-by-step: calculate your HRA exemption

Open the HRA Calculator tool.
Enter your monthly basic + DA, the HRA you receive, your monthly rent, and select whether you live in a metro city.
The tool instantly computes the three rule values and displays the minimum (exempt HRA) and the taxable portion.
Use the result to plan your rent — sometimes a slight rent increase can maximise your exemption, as long as you can claim it with proper documentation.

💡 Tip: If your rent exceeds ₹1,00,000 per year, you must provide the landlord’s PAN. If your landlord doesn’t have a PAN, they need to give a declaration, and the exemption will be capped at the rental amount claimed, but the absence of PAN can still trigger queries from the tax department.

Worked example: Basic ₹50,000, HRA ₹20,000, Rent ₹18,000, Metro

Rule A = ₹20,000. Rule B = Rent ₹18,000 − 10% of basic (₹5,000) = ₹13,000. Rule C = 50% of basic = ₹25,000. The minimum of the three is ₹13,000. So your monthly exempt HRA is ₹13,000, and the taxable HRA is ₹7,000 (₹20,000 − ₹13,000). Annually, exempt HRA = ₹1,56,000, taxable HRA = ₹84,000.

Frequently Asked Questions

Can I claim HRA if I live in my own house?

No. HRA exemption requires that you actually pay rent for accommodation. If you own the house or live rent‑free, the entire HRA is taxable.

What if my rent is paid to my parents?

Yes, you can claim HRA if you pay rent to your parents and they own the house. The parents must declare the rental income in their tax return, and you’ll need rent receipts or bank transfers as proof.

Do I need rent receipts every month?

Ideally, yes. You should keep rent receipts for each month. For annual claims below ₹1,00,000, rent receipts alone may suffice. Above that, the landlord’s PAN is mandatory.

Can I claim HRA under the new tax regime?

No. The new regime (FY 2025-26) does not allow HRA exemption. The HRA calculator helps those using the old regime or comparing both. See our in‑hand salary calculator for new regime estimates.

Is it free and private?

Yes — the tool runs entirely in your browser, free, with no sign‑up and nothing uploaded to a server.

Try the HRA Calculator