See how much of your house rent allowance is tax free under the old regime, which of the three limits decides it, and what it saves you. No HRA? It works out the rent deduction instead. Rules as at October 2026.
Saves about ₹74,880 in tax at the 30% slab, under the old regime. The other ₹60,000 of HRA is taxed as salary.
| HRA received | ₹3,00,000 |
|---|---|
| Rent paid minus 10% of basic and DALowest | ₹2,40,000 |
| 50% of basic and DA | ₹3,00,000 |
Basic pay and DA of ₹50,000 a month, HRA of ₹25,000 and rent of ₹25,000, living in Mumbai, for a full year.
The lowest is ₹2,40,000, so that much of the ₹3,00,000 HRA is tax free and ₹60,000 is taxed as salary. At the 30% slab that saves about ₹74,880 a year. Here rent is the limit, so higher rent would raise the exemption, up to ₹30,000 a month, where the next limit of ₹3,00,000 takes over.
The exempt amount is the lowest of three figures for the year: the HRA you actually received, the rent you paid minus 10% of your basic pay and DA, and 50% of basic pay and DA if you live in a metro city or 40% elsewhere. The rest of your HRA is taxed as salary.
No. The HRA exemption is only available under the old regime. Under the new regime the whole allowance is taxable, which is one reason people with high rent sometimes stay on the old regime.
Delhi, Mumbai, Kolkata and Chennai have always counted at 50%. Under the Income-tax Rules, 2026, Bengaluru, Hyderabad, Pune and Ahmedabad also count at 50% from tax year 2026-27. Everywhere else counts at 40%.
Yes, if your parent owns the home, the rent is actually paid, preferably by bank transfer, and they report it as income in their own return. From 2026-27 the declaration you give your employer asks for your relationship to the landlord, so state it. Rent paid to a spouse is generally not accepted.
Your employer will ask for it when the rent you pay is more than ₹1 lakh a year. Without it, the employer may not allow the exemption through payroll, though you can still claim it when you file your return if you have the evidence.
Yes, under the old regime. If you receive no HRA during the year and do not own a home where you live or work, you can deduct the lowest of ₹5,000 a month, 25% of your total income, and rent paid minus 10% of total income. You make a declaration when you file your return.
No. If payroll did not allow the exemption, more tax will have been deducted, but you can claim the exemption in your return under the old regime and get the excess back as a refund. Keep the receipts and the rent agreement.
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