House rent allowance (HRA) is partly or fully tax-free if you pay rent and choose the old tax regime. The exempt amount is the least of three numbers.
The formula
- The HRA your employer actually pays you.
- Rent you pay minus 10% of your basic salary (plus dearness allowance, if any).
- 50% of basic salary if you live in a metro, or 40% in any other city.
Whatever is left of your HRA after the exempt amount is added to your taxable income.
Which cities count as metro?
From FY 2026-27 the 50% limit applies to these eight cities: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad. Before that, only Delhi, Mumbai, Kolkata and Chennai counted. The city is where you live, not where your employer is.
A worked example
Basic salary ₹50,000 a month, HRA received ₹25,000 a month, rent paid ₹20,000 a month, living in Bengaluru.
- HRA received: ₹25,000
- Rent minus 10% of basic: ₹20,000 − ₹5,000 = ₹15,000
- 50% of basic (metro): ₹25,000
The least is ₹15,000, so ₹15,000 a month (₹1.8 lakh a year) is exempt. The other ₹10,000 a month is taxable.
What you need to claim it
- Rent receipts or a rent agreement, and bank transfers as proof.
- The landlord's PAN if your yearly rent is above ₹1 lakh.
Does the new regime allow it?
No. If you choose the new regime, HRA exemption is not available, so compare both before you decide. Our HRA calculator works out your exempt amount and tax saved, and the regime guide shows when the old regime still wins.
Frequently asked questions
Can I claim HRA if I live with my parents?
Yes, if you actually pay rent to them and they declare it as income. Keep a proper agreement and bank transfers.
Can I claim HRA and home-loan interest together?
Yes, in the old regime, in some cases, for example if you live in a rented house in a city different from the one where your own house is. Rules are specific, so check with a CA.
Is HRA exempt in the new regime?
No. Only the old regime allows HRA exemption.
Last updated 2026-10-02. This guide gives general information for salaried individuals, not tax advice. Check the latest rules or ask a chartered accountant before you act.