Maximum HRA Exemption: Why There Is No Flat Limit
Reviewed by CA Nikhil Gupta · Last reviewed 30 August 2026
Section 10(13A) has no universal rupee cap.
The maximum exemption for a taxpayer is the lowest of the three Rule 2A limbs, and it can never exceed the HRA actually received or the genuine rent-based amount.
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
An employee in Mumbai has HRA salary of ₹8,00,000, actual HRA of ₹3,20,000 and rent of ₹3,00,000. The three limbs are ₹3,20,000, ₹2,20,000 and ₹4,00,000. Although 50% of salary is ₹4,00,000, the actual exemption is only ₹2,20,000 because the rent limb is lower.
What Generic Pages Miss
- Presenting 50% or 40% as the final answer.
- Quoting a universal annual cap that does not exist.
- Ignoring that actual HRA is an absolute ceiling.
- Assuming higher CTC HRA automatically produces tax saving.
- Failing to show taxable HRA after exemption.
Practical Documentation Checklist
- Annual HRA received
- Defined salary base
- Actual rent paid
- City classification
- Old-regime selection evidence
- Calculation audit trail
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
Section 10(13A) has no universal rupee cap. The maximum exemption for a taxpayer is the lowest of the three Rule 2A limbs, and it can never exceed the HRA actually received or the genuine rent-based amount.
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: