HRA Exemption Calculator
8 metro cities from FY 2026-27
Work out your tax-free House Rent Allowance from the minimum-of-three-rules formula — with the city list that actually applies to your year. Bengaluru, Hyderabad, Pune and Ahmedabad moved from 40% to 50% on 1 April 2026.
Read the full answer — method, rates and figures
Quick answer: HRA exemption is the least of three amounts: the actual HRA received, a percentage of salary (basic + DA) set by the city you live in, and the rent actually paid minus 10% of that salary. The city percentage changed on 1 April 2026.
For FY 2025-26 (assessment year 2026-27 — the return filed in 2026) the 50% limit applies only to Delhi, Mumbai, Kolkata and Chennai, and every other city, including Bengaluru, Hyderabad, Pune and Ahmedabad, gets 40%. From FY 2026-27 the Income-tax Rules, 2026 — notified by the CBDT on 20 March 2026 and in force from 1 April 2026 — raise the list to eight cities: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad at 50%, with 40% everywhere else.
Rule 279 of those Rules prescribes the limits. For a renter in Bengaluru with basic + DA of ₹12,00,000 the city limit rises from ₹4,80,000 to ₹6,00,000, about ₹37,440 of tax a year in the 30% slab — but only if the city limit, rather than the actual HRA or the rent-minus-10% figure, is the binding rule.
HRA exemption is available only under the old tax regime; under the new regime HRA is fully taxable.
Income earned from 1 April 2026, reported in 2027. New eight-city list under the Income-tax Rules, 2026.
Your city limit for FY 2026-27 is 50% of basic + DA. This city moved from 40% to 50% on 1 April 2026.
Tax-free HRA exemption — FY 2026-27
📍 Bengaluru (Bangalore) moved to the 50% list on 1 April 2026
On these numbers the change is worth ₹1.20 L of extra exempt HRA in FY 2026-27 compared with the old four-city rule — roughly ₹37,440 of tax a year in the 30% slab. Switch the year above to compare.
💰 Tax saving estimate (old regime, 30% slab)
HRA exemption is available under the old regime only. Under the new regime HRA is fully taxable, whichever city you live in.
What your HRA exemption is worth to you
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HRA city limits: what changed on 1 April 2026
The four-city list had stood unchanged for decades while Bengaluru, Hyderabad, Pune and Ahmedabad grew into high-rent cities stuck on the lower 40% limit. The Income-tax Rules, 2026 closed that gap. The old list still governs the return you file in 2026, so both columns matter this year.
| City | FY 2025-26 (AY 2026-27) | FY 2026-27 onwards |
|---|---|---|
| Mumbai, Delhi, Kolkata, Chennai | 50% | 50% |
| Bengaluru | 40% | 50% |
| Hyderabad | 40% | 50% |
| Pune | 40% | 50% |
| Ahmedabad | 40% | 50% |
| Every other location | 40% | 40% |
The percentage applies to salary for HRA purposes — basic pay plus dearness allowance forming part of retirement benefits — not CTC or gross salary.
Worked example: a Bengaluru renter across the change
Basic + DA ₹12,00,000 a year, HRA received ₹6,00,000, rent paid ₹6,00,000. Only the city limit moves; the other two rules are identical in both years.
| Rule | FY 2025-26 (40%) | FY 2026-27 (50%) |
|---|---|---|
| 1 — Actual HRA received | ₹6,00,000 | ₹6,00,000 |
| 2 — City limit on basic + DA | ₹4,80,000 | ₹6,00,000 |
| 3 — Rent − 10% of basic + DA | ₹4,80,000 | ₹4,80,000 |
| Exempt (lowest) | ₹4,80,000 | ₹4,80,000 |
Note the sting in the tail: on these numbers the exemption does not move, because rule 3 — rent minus 10% of salary — is now the binding limit in both years. The 50% city limit only pays off once your rent is high enough that rule 3 clears it. Raise the rent in the calculator above to ₹7,20,000 and the FY 2026-27 exemption rises to ₹6,00,000 while FY 2025-26 stays at ₹4,80,000. This is exactly the check most “Bengaluru now gets 50%” explainers skip.
Last reviewed 7 August 2026. Sources: Income-tax Rules, 2026 (notified by the CBDT on 20 March 2026, in force 1 April 2026), rule 279 — limits for house rent allowance, read with Schedule III of the Income-tax Act, 2025; Section 10(13A) of the Income-tax Act, 1961 and rule 2A of the Income-tax Rules, 1962 for FY 2025-26. Section numbering under the 2025 Act applies from tax year 2026-27; the 1961 Act governs FY 2025-26. Confirm your position on incometax.gov.in before filing — this is general information, not tax advice for your circumstances.
Last reviewed 13 October 2026 by the Richify AI agent team.
Reviewed by Felix, Richify's AI CFO — an AI author, presented as one.
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HRA exemption is the lowest of three competing limits, so raising one of them only helps if it was the one holding you back:
- Rule 1 — actual HRA received. You can never exempt more HRA than your employer actually pays you.
- Rule 2 — the city limit. 50% of basic + DA in the listed cities, 40% everywhere else. This is the rule that changed: from FY 2026-27 the 50% list runs to eight cities instead of four.
- Rule 3 — rent minus 10% of salary. Rent actually paid, less 10% of basic + DA. If your rent is below 10% of salary this is zero and nothing is exempt.
The change comes from the Income-tax Rules, 2026, notified by the CBDT on 20 March 2026 and in force from 1 April 2026 alongside the Income-tax Act, 2025. Rule 279 prescribes the HRA limits and lists Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad at 50%, with 40% for any other place. The exemption itself sits in Schedule III of the Income-tax Act, 2025 for FY 2026-27 onwards; for FY 2025-26 it is Section 10(13A) of the Income-tax Act, 1961, under which only the classic four cities qualify. HRA is an old-regime benefit in both years.
How to use this calculator
- Pick the financial year. FY 2025-26 is the return you file in 2026 (assessment year 2026-27) and uses the old four-city list; FY 2026-27 is the year you are earning in now and uses the new eight-city list.
- Choose your city from the dropdown. The calculator applies 50% or 40% for you — you no longer have to know whether your city counts as a metro, because for four cities the answer changed on 1 April 2026.
- Enter your annual basic salary plus dearness allowance. Use basic + DA, not your CTC or gross salary — this is the figure both the 50/40 rule and the 10% rule are computed on.
- Enter the annual HRA your employer actually pays you and the annual rent you actually pay. Rent is what you paid, not what your agreement says you might pay.
- Read the exempt figure and the winning rule. If the city limit is the binding rule and you are in one of the four newly added cities, switch years to see exactly how much extra becomes exempt from FY 2026-27 — then give payroll your rent proofs so the higher limit reaches your TDS.
❓ Frequently Asked Questions
Which Indian cities get the 50% HRA exemption in 2026?
It now depends on the year. For FY 2025-26 (assessment year 2026-27 — the return being filed in 2026) only four cities qualify for the 50% limit: Delhi, Mumbai, Kolkata and Chennai.
From FY 2026-27 onwards the Income-tax Rules, 2026 — notified by the CBDT on 20 March 2026 and in force from 1 April 2026 — expand that list to eight by adding Bengaluru, Hyderabad, Pune and Ahmedabad. Every other location, including Gurgaon, Noida, Jaipur, Lucknow, Indore, Kochi and Coimbatore, stays at the 40% limit.
This is the first change to the HRA city list in decades, and it is the single most common thing people get wrong about HRA right now.
How is HRA exemption calculated in India?
The exempt HRA is the MINIMUM of three amounts: (1) the actual HRA received from your employer for the year, (2) 50% of salary (basic + dearness allowance forming part of retirement benefits) if you live in one of the listed cities, otherwise 40%, and (3) the annual rent you actually paid minus 10% of that same salary. The lowest of the three is your tax-free HRA; anything above it is taxable salary.
Note that rule (3) means you get no exemption at all unless your rent exceeds 10% of salary, however generous your HRA is.
Does the new 8-city HRA rule apply to the ITR I am filing now?
No. The return being filed in 2026 is for FY 2025-26 (assessment year 2026-27), and that year is governed by the old four-city list — Delhi, Mumbai, Kolkata and Chennai. If you live in Bengaluru, Hyderabad, Pune or Ahmedabad you must still use 40% for this return; claiming 50% would overstate your exemption and invite a correction notice.
The 50% limit applies to income earned from 1 April 2026, which you will report in the return filed in 2027. Set this calculator to the right year before you copy a number into your ITR.
I live in Bengaluru — how much more HRA is exempt from FY 2026-27?
The increase is 10% of your salary (basic + DA), but only to the extent the other two limits do not bite first. If your basic + DA is ₹12,00,000, the city limit rises from ₹4,80,000 to ₹6,00,000 — ₹1,20,000 more headroom, worth about ₹37,440 of tax a year in the 30% slab with cess.
You only capture it if your actual HRA and your rent-minus-10% figure are both above the new limit; if either of those is the binding constraint, the city change makes no difference to you. Run both years in this calculator to see which rule wins in your case, and tell your payroll team so your FY 2026-27 TDS is computed on the higher exemption instead of you waiting to claim a refund.
Is HRA exemption available under the new tax regime?
No. The HRA exemption is available only under the old regime. Under the new regime — the default — HRA is fully taxable as part of your salary, so the city list and the 50/40 split are irrelevant to you.
This matters when you compare regimes: a large HRA exemption is one of the few things that can still make the old regime win, and the four newly added cities make that slightly more likely from FY 2026-27 for renters in Bengaluru, Hyderabad, Pune and Ahmedabad. Use Richify's income tax calculator to compare both regimes on your full salary before choosing.
Can I claim HRA if I pay rent to my parents?
Yes, provided the arrangement is genuine. Your parents must own the property, you must actually pay the rent by bank transfer rather than cash, and they must declare that rent as income from house property in their own returns.
Keep a written rent agreement and twelve months of receipts. Rent above ₹1,00,000 a year also requires you to give your employer the landlord's PAN — your parent's PAN in this case.
Fabricated receipts to a parent who never declares the income are a well-known assessment trigger, and the deduction is disallowed with penalty when it is caught.
What documents do I need to claim HRA?
Rent receipts from your landlord for the year, and, where the annual rent exceeds ₹1,00,000, the landlord's PAN. If the landlord will not provide a PAN you can submit a Form 60 declaration instead, though employers often refuse the exemption in the TDS computation and leave you to claim it in the return.
Pay by bank transfer so there is a trail, keep the rent agreement, and submit everything to payroll during the investment-proof window — for FY 2026-27 that is the moment to flag a Bengaluru, Hyderabad, Pune or Ahmedabad address, since the higher 50% limit should now be built into your monthly TDS.
Can I claim HRA and a home loan deduction at the same time?
Yes, in genuine cases. You can claim HRA on the house you rent and the home-loan interest deduction on a property you own elsewhere — the standard case being a flat you own in your home city while you rent in the city you work in.
Both are valid and frequently claimed together. What you cannot do is claim HRA while living in your own property in the same city: the exemption requires that you actually pay rent for accommodation you occupy.
Expect scrutiny where the owned and rented addresses are in the same city, and keep the employer transfer letter or similar evidence.
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Further Reading
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