HRA calculator

This calculator works out your house rent allowance and how much of it is tax-free. HRA is a percentage of your basic pay set by your city class, 30, 20, or 10 per cent for X, Y, and Z cities, and part of it is exempt from income tax under Section 10(13A) as the least of three prescribed amounts. Enter your basic pay, dearness allowance, city class, whether you live in a metro, and your rent; the calculator returns the HRA you receive, the exempt part, and the taxable part. The exemption applies under the old tax regime; the income tax calculator then shows which regime is better for you.

Calculator

Exempt against taxable

How the HRA amount is set

Your house rent allowance is a fixed percentage of your basic pay, decided by the class of your city. The rates, under the Department of Expenditure Office Memorandum of 7 July 2017, are 30 per cent for X-class cities, 20 per cent for Y-class, and 10 per cent for Z-class, subject to a minimum of Rs. 5,400, Rs. 3,600, and Rs. 1,800 a month respectively, so that a low basic pay does not produce a negligible allowance. The house rent allowance article lists the cities in each class, and the city classification for HRA reference explains how a city is graded by population.

The rates rise with dearness allowance. When the 7th CPC set them, they were 24, 16, and 8 per cent, to become 27, 18, and 9 per cent once dearness allowance crossed 25 per cent, and 30, 20, and 10 per cent once it crossed 50 per cent. Dearness allowance reached 50 per cent on 1 January 2024, so the rates are now at their top step of 30, 20, and 10 per cent. Note that the dearness allowance is not added to the HRA amount; the HRA is a percentage of basic pay alone.

How much HRA is exempt from tax

The tax exemption is where most of the confusion lies. Under Section 10(13A) of the Income-tax Act, the exempt HRA is the least of three amounts:

• a. The actual HRA received.
• b. 50 per cent of salary if you live in a metro, or 40 per cent if you do not, where salary is basic pay plus dearness allowance.
• c. The rent you pay, minus 10 per cent of salary.

The calculator computes all three and takes the lowest. Because of amount (c), if you pay little or no rent, the exemption shrinks to little or nothing, regardless of how much HRA you receive. And because of amount (a), the exemption can never exceed the HRA you actually get.

Metro is not the same as X-class

The single most common error is to treat the HRA city class and the tax metro as the same thing. They are not. The HRA rate of 30 per cent applies to all eight X-class cities. The 50 per cent tax factor in amount (b) applies only to the four metros, Delhi, Mumbai, Kolkata, and Chennai. So a resident of an X-class city that is not one of the four metros, such as Bengaluru, Hyderabad, Pune, or Ahmedabad, receives HRA at 30 per cent of basic but computes the exemption at 40 per cent of salary, not 50. The calculator keeps the two apart: the city-class dropdown sets the rate, and the metro tick sets the tax factor.

A worked example

Take an employee with a basic pay of Rs. 50,000 in Mumbai, an X-class metro, with dearness allowance at 60 per cent and a rent of Rs. 20,000 a month. The HRA received is 30 per cent of Rs. 50,000, which is Rs. 15,000 a month. Salary for the exemption is basic plus dearness allowance, Rs. 50,000 plus Rs. 30,000, which is Rs. 80,000.

The three amounts are: (a) the actual HRA, Rs. 15,000; (b) 50 per cent of Rs. 80,000, which is Rs. 40,000, because Mumbai is a metro; and (c) the rent of Rs. 20,000 minus 10 per cent of Rs. 80,000, which is Rs. 20,000 minus Rs. 8,000, or Rs. 12,000. The least of the three is Rs. 12,000, so Rs. 12,000 of the HRA is exempt and the remaining Rs. 3,000 a month is taxable. If the same employee paid Rs. 30,000 rent, amount (c) would rise to Rs. 22,000, above the actual HRA of Rs. 15,000, so the whole HRA would be exempt.

Using the result

The exempt HRA reduces your taxable income under the old regime only; under the new regime the whole HRA is taxable. So the HRA exemption is one of the deductions that can tip the old regime against the new in your favour: enter the exempt figure from this calculator into the income tax calculator’s HRA field to compare the two regimes. The figure here is a guide based on the standard rule; your employer computes the final exemption on your Form 16 from your declared rent.

See also

• House rent allowance
• City classification for HRA
• Income tax calculator: old vs new regime
• Income tax for government employees
• Dearness allowance
• Pay matrix
• 7th CPC salary calculator
• Take-home salary
• Central government employees in India

External references

• Income Tax Department
• Department of Expenditure, Ministry of Finance