HRA Exemption Calculator: Tax-Free HRA for 2026-27

October 15, 2026

If you pay rent and get HRA in your salary, part of it can be tax-free. How much depends on three numbers, and your employer’s payslip will not show you which one is limiting you. This guide explains the formula, the change to the 50% city list from 1 April 2026, and the one thing that matters most: HRA exemption works only under the old tax regime.

[Use the HRA Calculator above ↑] Enter your salary, HRA, rent and city to see your exempt and taxable HRA.

The HRA Exemption Formula

Your tax-free HRA is the lowest of these three amounts:

The HRA your employer actually pays you.
Your rent paid minus 10% of your salary.
50% of your salary if you live in one of the listed cities, or 40% if you live anywhere else.

“Salary” here means your basic pay plus dearness allowance that counts as pay. It does not mean your gross salary or CTC. Special allowance, bonus and other components are left out, which is why a salary with a low basic gives a low exemption.

Whatever is left after the exempt part is taxable HRA and is added to your income.

Which Cities Get the 50% Limit in 2026-27?

Under the Income-tax Rules, 2026, which took effect on 1 April 2026, eight cities now qualify for the 50% limit. Four were added.

City	FY 2025-26	FY 2026-27
Delhi, Mumbai, Kolkata, Chennai	50%	50%
Bengaluru, Hyderabad, Pune, Ahmedabad	40%	50%
All other cities and towns	40%	40%

The change applies to salary earned from 1 April 2026. If you are filing a return for FY 2025-26, the four new cities are still at 40%. The calculator has a year selector for exactly this reason.

Worked Examples

Example 1: the 50% limit makes no difference. You live in Bengaluru. Basic pay is ₹50,000 a month, HRA is ₹25,000 and rent is ₹22,000.

HRA received: ₹25,000 × 12 = ₹3,00,000
Rent minus 10% of salary: (₹22,000 − ₹5,000) × 12 = ₹2,04,000
50% of salary: ₹25,000 × 12 = ₹3,00,000

The lowest is ₹2,04,000, so that is your exemption and ₹96,000 is taxable. Under the old 40% limit the third figure would be ₹2,40,000, and the answer would be the same. When rent is the lowest of the three, the city change does nothing for you.

Example 2: the 50% limit helps. Same city, but basic pay is ₹60,000, HRA is ₹35,000 and rent is ₹40,000.

HRA received: ₹35,000 × 12 = ₹4,20,000
Rent minus 10% of salary: (₹40,000 − ₹6,000) × 12 = ₹4,08,000
50% of salary: ₹30,000 × 12 = ₹3,60,000

The exemption is ₹3,60,000. At the old 40% limit it would have been ₹2,88,000, so the new rule adds ₹72,000 to the tax-free amount. At the 30% slab plus cess, that is roughly ₹22,000 of tax saved a year.

So the city change matters most to people whose rent is high compared with their basic pay.

HRA Does Not Work in the New Tax Regime

This is the part many HRA guides skip. If you choose the new tax regime, you get no HRA exemption at all. The full HRA is taxed as part of your salary, in every city.

So the real question is not “how much is my HRA exemption?” but “does the old regime, with HRA and my other deductions, beat the new regime’s lower slabs?” If your exempt HRA is small, or you have few other deductions such as 80C and home loan interest, the new regime often wins. Use the in-hand salary calculator to compare your take-home under both, and the TDS calculator to see what your employer is likely to deduct each month.

Rent Proof, Landlord PAN and Rent to Parents

Rent above ₹1 lakh a year: your employer needs your landlord’s name, address and PAN. That works out to rent above about ₹8,333 a month.
Relationship with the landlord: the new declaration form your employer collects, Form 124, asks you to state it if the landlord is a relative.
Paying rent to your parents: this is allowed if the rent is real, you pay it by bank transfer, and your parent declares it as income in their own return. Rent paid to a parent is taxable in their hands, so check that it does not push them into a higher slab.
Keep your records: rent receipts, the rent agreement and bank transfer entries. If the tax department asks, these are your proof.

Common Mistakes

Using gross salary instead of basic plus DA. This overstates limits 2 and 3.
Forgetting to declare rent to your employer. If you do not submit your rent details on time, your employer deducts TDS as if you get no exemption. You can still claim it when you file your return, but you wait for the refund.
Assuming the new city list applies to your FY 2025-26 return. It starts from FY 2026-27.
Staying on the new regime by default. Check the numbers once a year. HRA plus other deductions can make the old regime cheaper for you, especially in a high-rent city.

Frequently Asked Questions

Is HRA exemption available in the new tax regime?
No. HRA exemption is available only under the old tax regime. Under the new regime, your full HRA is taxable.

Which cities get the 50% HRA limit?
From FY 2026-27: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. All other cities get 40%.

Is HRA calculated on basic salary or gross salary?
On basic pay plus dearness allowance that counts as pay. Gross salary and CTC are not used.

Can I claim HRA if I pay rent to my parents?
Yes, if the rent is genuine, paid through a bank, and your parent shows it as income in their return. Keep rent receipts and proof of payment.

Do I need my landlord’s PAN?
Yes, if the rent you pay in the year is more than ₹1,00,000. Below that, your employer does not need it.

What if my employer did not give me HRA?
This calculator does not apply, because the exemption works only on HRA you receive. There is a separate, smaller rent deduction for people who get no HRA, so check with a CA.

See also our gratuity calculator, which also depends on your basic pay, and the in-hand salary calculator.

Sources: Income-tax Rules, 2026 (effective 1 April 2026) as reported by Upstox and Mondaq; HRA formula and old-regime treatment as described in the Income-tax Act provisions on house rent allowance. Verified October 2026. Confirm your own numbers with your employer or a CA before filing.