HRA Tax Exemption in India: How to Calculate and Maximise It

House Rent Allowance (HRA) is one of the biggest tax benefits for salaried renters in India — but only under the old tax regime. If you pay rent and receive HRA in your salary structure, understanding the exemption formula can meaningfully reduce taxable income.

Who can claim HRA exemption

• Salaried employee receiving HRA as part of CTC
• Actually paying rent (not living in own house)
• Opted for or eligible under the old tax regime
• Rent receipts and landlord PAN if rent exceeds ₹1 lakh/year

The minimum-of-three rule

Exempt HRA is the lowest of: (1) actual HRA received, (2) 50% of basic salary in metro cities (Delhi, Mumbai, Kolkata, Chennai) or 40% in non-metro, (3) rent paid minus 10% of basic salary.

Quick example (metro)

• Basic salary: ₹6 lakh/year · HRA received: ₹2.4 lakh · Rent paid: ₹2.4 lakh (₹20k/month)
• 50% of basic = ₹3 lakh · Rent − 10% basic = ₹2.4L − ₹60k = ₹1.8 lakh
• Exemption = min(2.4L, 3L, 1.8L) = ₹1.8 lakh taxable HRA reduced

HRA and the new tax regime

The new default regime does not allow HRA deduction. High renters with large 80C and home loan benefits often still win on the old regime — Plynt compares both using your actual rent and CTC.

Documents to keep

• Rent receipts (monthly or annual)
• Rental agreement
• Landlord PAN if annual rent > ₹1 lakh
• Form 12BB submitted to employer