HRA

House Rent Allowance is a component of your salary structure paid by Indian employers to compensate for rental accommodation. Under the old tax regime, a large portion of HRA is exempt from income tax — often making it the single biggest deduction for urban salaried employees who rent. The exemption is available only if you actually pay rent and submit rent receipts with your employer's tax proofs.

The exempt HRA is the minimum of three amounts: (a) the actual HRA received from your employer, (b) rent paid minus 10% of basic salary, and (c) 50% of basic salary if you live in a metro (Mumbai, Delhi, Kolkata, Chennai) or 40% otherwise. Worked example: basic ₹60,000/month, HRA ₹25,000, rent ₹22,000 in Mumbai. The three are ₹25,000, ₹16,000, and ₹30,000 — so ₹16,000/month (₹1.92 lakh/year) is tax-free.

Under the new tax regime (default from FY 2023-24), HRA exemption is not available — so the old regime can still beat the new one for high-rent tenants. You must also furnish your landlord's PAN if annual rent exceeds ₹1 lakh (Section 194-IB and CBDT rules).

Our HRA calculator computes the exempt portion for both monthly and annual figures — use it to decide whether to opt for the old or new regime this year.