If you get house rent allowance (HRA) and pay rent, part of your HRA is tax-free under the old tax regime. The exempt amount is the lowest of three figures. From tax year 2026-27, Bengaluru, Pune, Hyderabad and Ahmedabad join the 50% list, so many tenants there can now claim more.
The formula
Your HRA exemption is the least of:
- Actual HRA received from your employer
- 50% of salary if you live in one of the 8 listed cities, or 40% elsewhere
- Rent paid minus 10% of salary
Here “salary” means basic pay plus dearness allowance (if it counts for retirement benefits) plus any commission fixed as a percentage of turnover. Other allowances are left out.
Which cities get 50%
| 50% of salary | 40% of salary |
|---|---|
| Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Pune, Hyderabad, Ahmedabad | All other cities and towns |
The rate depends on the city where you actually live and pay rent, not where your employer’s head office is.
Worked example: Pune, ₹30,000 rent
Basic pay ₹50,000 a month (₹6 lakh a year), HRA ₹25,000 a month (₹3 lakh a year), rent ₹30,000 a month (₹3.6 lakh a year).
| Test | Amount |
|---|---|
| 1. Actual HRA | ₹3,00,000 |
| 2. 50% of salary (Pune is now a 50% city) | ₹3,00,000 |
| 3. Rent minus 10% of salary (₹3,60,000 – ₹60,000) | ₹3,00,000 |
| Exempt HRA | ₹3,00,000 |
Under the earlier 40% rate, the second test would have been ₹2,40,000, so ₹60,000 more of this employee’s HRA is now tax-free. Try your own figures in the HRA calculator.
Documents and conditions
- Rent receipts or a rent agreement for the whole period you claim.
- Landlord’s PAN if the rent is more than ₹1 lakh a year.
- Your relationship with the landlord must now be disclosed when you claim HRA.
- Rent paid to a parent is allowed if it is genuinely paid and the parent shows it as income. Rent paid to your spouse is usually questioned.
- You cannot claim HRA for a house you own and live in.
New regime and no-HRA cases
- New tax regime: HRA exemption is not available. Compare both regimes in the income tax calculator.
- No HRA in your salary (self-employed or employer doesn’t pay it): under the old regime you may claim a rent deduction of up to ₹60,000 a year (formerly Section 80GG, now Section 84 of the Income-tax Act, 2025), subject to conditions.
- Missed telling your employer: you can still claim HRA in your income tax return if you have the proof.
Good to know
HRA exemption was in Section 10(13A) of the 1961 Act; under the Income-tax Act, 2025 it sits in Section 11 read with its Schedules. Check your CTC vs in-hand salary breakdown to see how much HRA you are actually paid.
Frequently asked questions
Which cities get 50% HRA exemption from tax year 2026-27?
Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Pune, Hyderabad and Ahmedabad. All other cities and towns get 40% of salary.
Can I claim HRA under the new tax regime?
No. HRA exemption is available only under the old tax regime.
When do I need my landlord’s PAN?
When the rent you pay is more than ₹1 lakh a year.