How HRA Exemption is Calculated
HRA exemption is the minimum of:
- Actual HRA received from employer
- 50% of Basic (Metro) or 40% of Basic (Non-Metro)
- Rent paid minus 10% of Basic salary
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Metro Cities
Metro cities for HRA: Delhi, Mumbai, Chennai, Kolkata. All other cities are non-metro (40% rule applies).
Example Calculation
For Basic ₹50,000, HRA ₹20,000, Rent ₹25,000 in Mumbai:
- Actual HRA: ₹20,000
- 50% of Basic: ₹25,000
- Rent - 10% Basic: ₹25,000 - ₹5,000 = ₹20,000
- Exempt HRA: ₹20,000 (minimum)
HRA Exemption Rules
- You must actually pay rent
- Cannot claim if living in own house
- If no HRA component in salary, claim under Sec 80GG
- Provide PAN of landlord if rent > ₹1 lakh/year