HRA exemption calculator

This calculator works out the tax-free part of your house rent allowance under Section 10(13A) of the Income-tax Act, 1961. The exemption is the least of three amounts, and the calculator shows which one binds, the exempt HRA, and the taxable HRA that is left. It applies to a salaried person, including a central government employee, who pays rent and opts for the old tax regime.

Calculator

Which of the three is smallest

What the calculator computes

House rent allowance is part of the salary of most central government employees and other salaried people who rent their home. Section 10(13A) makes part of it tax-free, and the rest is added to taxable income. The tax-free part is not a flat percentage; it is the least of three amounts, so the exemption is capped by whichever of the three is smallest for your figures.

The calculator takes your basic pay, dearness allowance, HRA, and rent, works out the three amounts, and reports the least of them as the exempt HRA. It then shows the taxable HRA that remains and the exempt amount for a full year. Because the exemption depends on the smallest of the three, a higher rent or a metro posting does not always raise it; the binding amount is often the rent leg.

The formula

Salary for this purpose is basic pay plus dearness allowance (for a government employee the full DA counts, because it forms part of pay for retirement benefits). The exemption is:

Exempt HRA = the least of

1. the actual HRA received;
2. the rent paid minus 10 per cent of salary (never less than zero);
3. 50 per cent of salary if you live in a metro, or 40 per cent of salary otherwise.

The taxable HRA is the HRA received minus the exempt HRA. If the rent does not exceed 10 per cent of salary, the second amount is nil, and so is the exemption.

The metro list for the 50 per cent leg is only four cities: Delhi, Mumbai, Kolkata, and Chennai. This is a common source of error, because the Department of Expenditure separately classifies cities as X, Y, and Z to decide how much HRA to pay (30, 20, and 10 per cent of basic pay). Those are two different rules: the city class decides how much HRA you get, and the four-city metro list decides the 50 per cent leg of the tax exemption. Bengaluru and Hyderabad, for instance, are higher-class cities for the allowance but take the 40 per cent leg for the exemption.

A worked example

Take a government employee in Delhi with a basic pay of Rs. 50,000, dearness allowance of Rs. 30,000, HRA of Rs. 13,500, and rent of Rs. 20,000 a month, on the old regime. Salary is Rs. 80,000.

The three amounts are: the actual HRA, Rs. 13,500; the rent minus 10 per cent of salary, Rs. 20,000 minus Rs. 8,000, which is Rs. 12,000; and 50 per cent of salary, Rs. 40,000. The least is Rs. 12,000, so Rs. 12,000 of the HRA is tax-free and Rs. 1,500 is taxable. Over a year that is Rs. 1,44,000 exempt.

Had the same person paid only Rs. 5,000 rent, the second amount would be Rs. 5,000 minus Rs. 8,000, which is below zero and so nil, and the whole HRA would be taxable. Under the new regime, the exemption does not apply at all and the full Rs. 13,500 is taxable.

Notes and scope

The HRA exemption is available only under the old tax regime. Under the new regime, the default from assessment year 2024-25, the whole HRA is taxable, and the calculator shows that when you select it. You must actually pay the rent and not own or occupy the house, and if the rent is more than Rs. 1,00,000 in the year you must report the landlord’s PAN to claim the exemption.

The calculator uses monthly figures and multiplies by twelve for the year, which fits the common case of steady pay and rent. If your salary, rent, or city changed during the year, the exemption is worked out separately for each period and added up, so run the calculator once for each period.

You can claim the HRA exemption and the deduction for home-loan interest under Section 24(b) in the same year where the facts support it, for example when you rent the home you live in and own a house that is let out or lies in another city. The two are separate reliefs under separate sections, so one does not cancel the other. What is not allowed is claiming HRA exemption for rent paid to a spouse for a house you occupy together, or claiming rent you do not actually pay; those are the points the tax department tests when it examines an HRA claim.

See also

• House rent allowance
• HRA calculator
• Income tax for government employees
• Income tax calculator
• City classification for HRA
• Standard deduction
• Dearness allowance
• Take-home salary of central government employees
• 7th Central Pay Commission
• Pay matrix
• Central government employees in India

External references

• Income Tax Department
• Central Board of Direct Taxes
• Department of Expenditure
• Department of Personnel and Training