How HRA Exemption Works
HRA exemption is calculated as the minimum of three values: (1) Actual HRA received from employer, (2) 50% of basic salary + DA for metro cities or 40% for non-metro cities, and (3) Actual rent paid minus 10% of basic salary + DA.
Metro cities for HRA purposes are Delhi, Mumbai, Kolkata, and Chennai only. All other cities, including Bangalore, Hyderabad, and Pune, are considered non-metro.
Note: HRA exemption is available only under the old tax regime. If you opt for the new tax regime, you cannot claim HRA exemption. Use our Income Tax Calculator to compare which regime is better for you.