If rent paid is equal to or below 10% of HRA salary, the rent-based limb is nil or negative.
If rent paid is equal to or below 10% of HRA salary, the rent-based limb is nil or negative. Because the exemption is the least of three limbs, the HRA exemption is effectively nil for that period.
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.
The employee received ₹1,20,000 HRA and lives in Chennai, where the city limb is ₹3,00,000. Even so, the rent limb is nil because rent is below 10% of salary. The whole ₹1,20,000 HRA remains taxable. A higher city percentage cannot override the nil rent limb.
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.
If rent paid is equal to or below 10% of HRA salary, the rent-based limb is nil or negative. Because the exemption is the least of three limbs, the HRA exemption is effectively nil for that period.
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