Your HRA exemption, and which of the three tests decides it.

The working

How the figure is arrived at

Encoded from Two different citations for two different things. The exemption is given by s.11 of the Income-tax Act, 2025 read with Schedule III (Table: Sl. No. 11), which exempts the allowance only 'to such extent as may be prescribed having regard to the area or place in which such accommodation is situated' — that is the substantive authority, and it names no city and no share. The extent is prescribed by Rule 279 of the Income-tax Rules, 2026, which the Central Board of Direct Taxes made under s.533, the Act's rule-making power; rule 279 is headed 'Limits for the purposes of Schedule III [Table: Sl.No. 11] to the Act'. Rule 279's limit, read from the notified Rules on incometax.gov.in and verified on 9 August 2026.

• The exemption is the least of three amounts, not a percentage of anything. The allowance you receive; the rent you pay less 10% of salary; and 50% or 40% of salary. Two of the three ignore your rent entirely, which is why two people paying the same rent in the same city can be allowed very different figures.
• Salary means basic + DA, and only where the terms of employment provide for the DA. Rule 279(2) excludes every other allowance and every perquisite. It is not gross pay and it is not CTC — a visitor who takes 50% of a CTC will overstate the third test by a wide margin.
• The percentages and the city list are in the Rules, not in the Act. Section 11 read with the exemption Schedule creates the exemption and prescribes nothing numeric. Everything you can compute with is in Rule 279, which the Board notifies separately — so an Act-only verification of this page would find nothing to check.
• The second test can allow nothing at all. Rent at or below 10% of salary leaves the second test at zero, and the least of three that includes a zero is zero. The panel says so in words rather than printing a nil figure with no explanation.

The eight cities, and the four most calculators still use

G.S.R. 198(E), notified 20 March 2026 added Hyderabad, Pune, Ahmedabad, Bengaluru to the four cities the erstwhile Rule 2A named (Mumbai, Kolkata, Delhi, Chennai), with effect from tax year 2026-27. Four of the largest salaried populations in the country moved from the 40% test to the 50% one in a single notification.

We encode both lists, so this page can run the same three tests twice and show you the rupee difference rather than assert one. On the worked example above — ₹50,000 of basic + DA a month, ₹25,000 of allowance and ₹28,000 of rent in Bengaluru — the exemption is ₹23,000 a month, and on the four-city list it would be ₹20,000: a difference of ₹3,000 a month, ₹36,000 across the tax year.

The reason this is worth saying plainly: the change is invisible to anybody verifying against the Act. The percentages and the city list have never been in the Income-tax Act — not in the 2025 one and not in the 1961 one before it. They are in the Rules, which are notified on their own schedule, and a calculator built by diffing the Act each year would still be printing four cities today and would still believe it was current.

The whole chain, from the section down to the table that names the places — with the rule quoted from the Gazette, the rule it replaced quoted from the Department’s own text, and the pages we found still publishing the old list, quoted and dated — is on our guide to which cities count as metro for HRA.

What the tax office does with the figure

The exempt amount is not included in your salary income at all: section 11 of the Income-tax Act, 2025 read with the exemption Schedule keeps it out of total income, which is a different mechanism from a deduction and sits in a different part of your Form 16. The mapping from the section number you may know is on our section page for it, read from the enacted text rather than from a summary.

• Only the excess is taxed. On the worked example ₹25,000 of allowance a month produces ₹23,000 of exemption, so ₹2,000 stays in salary and is taxed at your slab rate.
• It is your employer who applies it during the year. The figure reaches you as a smaller TDS deduction each month, against the declaration and the rent receipts you give your employer — not as a refund at the end. If you did not declare it, you claim it on your return instead, and the arithmetic is the same.
• None of it applies under the new regime. Which is the default. This page computes the exemption; whether it is worth anything to you is the regime question, and that is a different page.

What this page does not model

Each of these makes somebody’s real exemption different from what this page shows, so they are listed here rather than left to be discovered.

• A part year in the accommodation — Rule 279(2) computes on the "relevant period" — the part of the tax year the accommodation was actually occupied — and each of the three tests is taken over that period rather than over twelve months. This page assumes the whole year. If you moved in during the year, or moved between a listed city and anywhere else, your exemption is the sum of the periods computed separately and it will be smaller than the figure here.
• Rent paid where you receive no house-rent allowance — that is a different provision — a deduction under section 134 of the Income-tax Act, 2025, with its own limits and its own conditions — and not this exemption at all. We have not read a government source for its limits, so we do not compute it. This page needs an allowance on the payslip to have anything to exempt.
• Whether the rent is genuinely paid, and to whom — the exemption is for rent actually paid for accommodation actually occupied. Rent to a spouse, rent for a house you own, and rent claimed without payment are all outside it, and above ₹1,00,000 a year your employer will ask for the landlord's permanent account number before allowing it in your Form 16. This calculator does the arithmetic; it does not audit the facts you enter.
• Dearness allowance that does not enter the retirement benefit — Rule 279(2) counts dearness allowance only "where the terms of employment so provide" — that is, where it forms part of the pay your retirement benefits are computed on. Where it does not, salary for this test is basic alone and your exemption is smaller. Your payslip and your appointment letter settle it, and we take the figure you enter at face value.
• Commission on a fixed percentage of turnover — some employment terms make a turnover-based commission part of salary for this test. We do not ask for it, so a visitor who earns one and enters basic + DA alone will see a smaller figure than they may be entitled to. We have not read a government source settling its treatment under the 2026 Rules, and we publish a figure after reading a source rather than before.
• What the exemption is worth to you in tax — it depends on the rest of your income and on whether the old regime pays you less overall. The regime advisor answers that with this exemption inside it, at your income and in your state.

Questions

Questions people actually ask

How is the HRA exemption calculated?

It is the least of three amounts, and the interesting part is which of the three is smallest. One: the house-rent allowance you actually receive. Two: the rent you pay less 10% of salary. Three: 50% of salary if you rent in Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad, Bengaluru, or 40% of salary anywhere else. Salary for all three means basic pay plus dearness allowance where the terms of employment provide for it — not gross pay and not CTC. The exemption is created by section 11 of the Income-tax Act, 2025 read with the exemption Schedule; the percentages and the city list are in Rule 279 of the Income-tax Rules, 2026.

Which cities get the 50% HRA exemption in FY 2026-27?

Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad, Bengaluru. That list has eight cities in it, not four. Rule 279 of the Income-tax Rules, 2026 — G.S.R. 198(E), notified 20 March 2026 — added Hyderabad, Pune, Ahmedabad, Bengaluru to the four cities the erstwhile Rule 2A named (Mumbai, Kolkata, Delhi, Chennai), with effect from this tax year. If you rent in one of the four new cities your exemption is larger than most published calculators will tell you, because the percentages and the list have never been in the Act: they live in the Rules, which the Central Board of Direct Taxes notifies separately, so a calculator that diffs only the Act would not have noticed.

Can I claim HRA exemption under the new tax regime?

No. The exemption is available under the old regime only. Under the new regime — which is the default unless you opt out, and which is why this matters — your house-rent allowance is part of salary and none of it is exempt. So this page answers a question that only bears on you if the old regime is the one you are on, and the honest first step is finding out whether it is. The regime advisor computes both on your figures, with this exemption inside the old one.

Why is my exemption smaller than my rent?

Because two of the three tests have nothing to do with your rent. The first caps the exemption at the allowance your employer actually pays you — you cannot exempt an allowance you were never paid, however much rent you pay. The third caps it at 50% or 40% of your salary. Where either of those is the smallest of the three, paying more rent will not raise your exemption by a single rupee, and this page tells you which one is binding rather than leaving you to work it out from one number. On the worked example above the rent test is the one that binds.

Why does the second test subtract 10% of my salary?

Because the relief is for rent that is a real burden on top of what your salary already assumes you spend on housing. The Rule allows the excess of rent over one-tenth of salary, so somebody paying 10% of salary or less in rent gets nothing from the second test at all — and since the exemption is the least of the three, they get no exemption. It is the commonest reason a person with a large allowance and a modest rent finds their exemption is nil.

What is salary for this test — is it my CTC?

No, and this is where most people's own arithmetic goes wrong. Rule 279(2) defines salary for this test as pay including dearness allowance where the terms of employment provide for it, and excludes all other allowances and perquisites. So it is basic + DA — not gross, and certainly not CTC, which also contains your employer's provident-fund contribution and its gratuity provision. A visitor who takes 50% of their CTC instead of 50% of basic will overstate the third test by a wide margin. Our CTC to in-hand calculator derives basic from a CTC if that is the only figure you have.

Is the exemption monthly or annual?

Annual. Rule 279 computes it over the relevant period — the part of the tax year the accommodation was occupied — and Form 16 reports one figure for the year. Every one of the three tests is linear in time, so a monthly view is that annual figure divided by twelve rather than a different computation. The fields on this page are monthly throughout, because a payslip is; the toggle changes only what the panel prints, and whichever unit you pick the panel puts the other one on the line under the figure.

Does my salary get sent anywhere?

No. The whole computation runs in your browser and there is no server to send it to. The share link puts your figures in the part of the URL after the "#", which browsers never send to a server at all — so the cookieless Cloudflare beacon that counts this page sees the URL without them. /privacy/ describes exactly what that beacon carries.

The rest of your payslip

This page answers what part of your house-rent allowance escapes tax. The old vs new regime advisor answers whether the regime that allows it is the one that costs you less, the CTC to in-hand calculator answers what reaches your account each month, and the gratuity and EPF calculator answers what your service is worth when you leave. Every dataset, source and verification date is on the methodology page, and what this site is and is not is on the disclaimer.