How to Calculate HRA Exemption for AY 2026-27
Reviewed by CA Nikhil Gupta · Last reviewed 5 August 2026
Calculate the exemption as the least of actual HRA received, rent paid minus 10% of HRA salary, and 50% of HRA salary for Mumbai, Kolkata, Delhi or…
Calculate the exemption as the least of actual HRA received, rent paid minus 10% of HRA salary, and 50% of HRA salary for Mumbai, Kolkata, Delhi or Chennai—40% elsewhere. The balance of HRA received is taxable salary.
Use the HRA Exemption Calculator — Tax Year 2026-27 to apply these points to your figures.
Legal or Computational Framework
This article uses the AY 2026–27 framework for income earned in FY 2025–26 under section 10(13A) of the Income-tax Act, 1961 read with Rule 2A. For this period, and in the current official departmental material reviewed on 1 August 2026, the 50% salary limb is restricted to Mumbai, Kolkata, Delhi and Chennai; all other locations use 40%. HRA exemption is ordinarily unavailable under the default new tax regime, so regime selection is a threshold eligibility question.
Worked Example
HRA salary is ₹6,60,000. Limb 1 is actual HRA of ₹2,40,000. Limb 2 is ₹3,00,000 minus ₹66,000, or ₹2,34,000. Limb 3 is 50% of ₹6,60,000, or ₹3,30,000. The exemption is the least amount—₹2,34,000—and taxable HRA is ₹6,000.
What Generic Pages Miss
- Using gross salary instead of the Rule 2A salary base.
- Using the employer’s office city instead of the rented house location.
- Calculating annually despite a mid-year move or salary change.
- Claiming the exemption in the new regime.
- Treating the 50% or 40% amount as the exemption rather than one of three ceilings.
Practical Documentation Checklist
- Salary slips and annual salary structure
- Form 16 and employer HRA working
- Rent agreement or occupancy document
- Rent receipts or bank payment trail
- Landlord PAN where annual rent reported to employer exceeds ₹1,00,000
- Period-wise city and rent details
For the complete rules on this topic, see the core guide: HRA Exemption: Rules, Formula and Maximum Limit.
See the broader Income Tax & Salary knowledge hub for related rules and calculators on this topic.
Finin2min Summary
Calculate the exemption as the least of actual HRA received, rent paid minus 10% of HRA salary, and 50% of HRA salary for Mumbai, Kolkata, Delhi or Chennai—40% elsewhere. The balance of HRA received is taxable salary.
Frequently Asked Questions
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in
Page source links
Primary sources & related provisions
Statutory provisions referenced in this guide: