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How exempt HRA is calculated
Exempt HRA is the least of: (1) actual HRA received; (2) rent paid minus 10% of salary; (3) 50% of salary in specified cities, 40% elsewhere. 'Salary' means basic plus dearness allowance (if it counts for retirement benefits) and commission at a fixed percentage of turnover.
What changed
Until FY 2025-26 the 50% limit applied only to Delhi, Mumbai, Kolkata and Chennai. From Tax Year 2026-27 it also covers Bengaluru, Hyderabad, Pune and Ahmedabad. Other cities — including Gurugram, Noida and Jind — stay at 40%.
Example
A Pune employee with basic salary ₹60,000 a month, HRA ₹30,000 and rent ₹28,000 a month. Annual figures: HRA ₹3,60,000; rent minus 10% of salary ₹2,64,000; 50% of salary ₹3,60,000 (it was 40%, ₹2,88,000, before). Exempt HRA is the least — ₹2,64,000 — so here the rent limit binds. Where rent is high, the 50% cap now gives a larger exemption. Run yours in the HRA calculator.
Conditions to remember
- HRA exemption is available only in the old regime.
- Give the landlord's PAN to your employer if rent exceeds ₹1 lakh a year.
- Rent paid to parents is allowed if it is genuinely paid and they show it as income; rent to a spouse is risky.
- Keep rent receipts and the agreement — HRA claims are a common verification target.
No HRA? Consider 80GG
Self-employed people, or employees without HRA, can claim rent under s.80GG→s.134 in the old regime: the least of ₹5,000 a month, 25% of adjusted total income, or rent minus 10% of adjusted total income — provided no house is owned at the place of work.
Founder, VJ & Associates, Jind — Taxation Lawyer & Legal Consultant, backed by the firm's Chartered Accountants, Company Secretaries and Tax Advocates. About the author · vinujaglan.com
General information as on 10 Nov 2026, not advice for your specific case. Laws, rates and dates change — see the disclaimer.
