From FY 2026-27, the 50% limit applies to eight cities: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Everywhere else, the limit is 40% of salary.
How HRA exemption is calculated
Exempt HRA = lowest of (Actual HRA, Rent − 10% of salary, 50% or 40% of salary)
- Salary
- Basic pay plus dearness allowance (DA)
- Actual HRA
- HRA received from your employer
- Rent − 10%
- Rent paid minus 10% of salary
- 50% / 40%
- 50% in the 8 metro cities, 40% elsewhere
All three amounts are worked out for the period you received HRA and paid rent. The lowest one is exempt; the rest of your HRA is taxed as salary.
HRA exemption is available only in the old regime. Under the new regime, the full HRA is taxable. If you pay rent but receive no HRA, you may claim a separate, smaller deduction under the old regime.
Documents you need to claim HRA
Employers ask for proof before giving the exemption through payroll. Keep these ready.
- Rent receipts or a rent agreement for the period claimed.
- Landlord's PAN if annual rent exceeds ₹1 lakh.
- Details of your relationship with the landlord, now required under the new rules.
- Rent paid to parents is allowed if they own the house and declare the rent as income.