Last updated: 2026-10-21
How HRA exemption is calculated
The tax-free part of your HRA is the lowest of:
- The HRA you actually receive
- Rent paid minus 10% of your basic salary + DA
- 50% of basic + DA if you live in one of the listed cities, or 40% elsewhere
The rest of your HRA is taxable.
New for FY 2026-27: 8 cities get the 50% limit
| Year | Cities with the 50% limit |
|---|---|
| FY 2025-26 | Delhi, Mumbai, Kolkata, Chennai |
| FY 2026-27 onwards | Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad |
If you live in one of the four new cities and pay high rent, your tax-free HRA can go up noticeably.
Example
Basic ₹50,000 a month, HRA ₹20,000, rent ₹25,000, living in Pune in FY 2026-27:
- HRA received: ₹2,40,000 a year
- Rent minus 10% of basic: ₹3,00,000 − ₹60,000 = ₹2,40,000
- 50% of basic: ₹3,00,000
The lowest is ₹2,40,000, so all of your HRA is tax-free.
Documents you need
- Rent receipts, or a rent agreement plus bank transfer proof
- Your landlord's PAN if rent is over ₹1 lakh a year
- If your employer didn't count your HRA, you can still claim it when filing your return
Frequently asked questions
Can I claim HRA in the new tax regime?
No. HRA exemption is only available in the old regime. Use our income tax calculator to check whether the old regime with HRA works out cheaper for you.
Can I claim HRA if I pay rent to my parents?
Yes, if you actually pay the rent (ideally by bank transfer), have a rent agreement, and your parent declares the rent as income in their tax return. You can't claim HRA for rent paid to your spouse.
Can I claim HRA and a home loan together?
Yes, if you live in a rented house in a different city from the one you own, or if there's a genuine reason you don't live in your own house.
I don't get HRA from my employer. Can I still save tax on rent?
Yes. Self-employed people and employees who don't get HRA can claim up to ₹60,000 a year under Section 80GG in the old regime, subject to conditions.
Compare both regimes with all your deductions.