HRA exemption calculator · FY 2026-27
HRA Exemption Calculator FY 2026-27 (Rule 279, 8 Metro Cities)
By Pratik Bajoria, Chartered Accountant & NISM-certified Research Analyst · Last reviewed 7 Oct 2026 by Pratik Bajoria, CA · Income-tax Rules, 2026 (in force 1 April 2026)
Every April, salaried clients in Bengaluru and Pune ask me the same thing: “Does the new 50% rule save me money?” Sometimes a lot. Often nothing. It depends on which of the three limits bites first.
HRA is partly tax-free only if you pay rent and choose the old regime. From FY 2026-27, the Income-tax Rules, 2026 (Rule 279) give Bengaluru, Hyderabad, Pune and Ahmedabad the 50%-of-salary limit, alongside Mumbai, Delhi, Kolkata and Chennai.
Estimated annual HRA exemption
₹2.1 L
HRA exemption formula (Rule 279, Income-tax Rules 2026)
Exempt HRA = least of [ HRA received, Rent − 10% of salary, 50% or 40% of salary ]
| Location of rented home | Limit |
|---|---|
| Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad | 50% of salary |
| Any other place (e.g. Gurugram, Noida, Jaipur, Kochi) | 40% of salary |
Source: CBDT Notification No. 22/2026, G.S.R. 198(E) dated 20 March 2026, Income-tax Rules, 2026, Rule 279; effective 1 April 2026. "Salary" = basic + DA (if it forms part of retirement benefits) + turnover-based commission, for the period the home was rented.
Worked example: Bengaluru employee
| Component | Annual amount |
|---|---|
| Basic + DA (₹50,000 × 12) | ₹6,00,000 |
| HRA received (₹25,000 × 12) | ₹3,00,000 |
| Rent paid (₹35,000 × 12) | ₹4,20,000 |
| (1) HRA received | ₹3,00,000 |
| (2) Rent − 10% of salary | ₹3,60,000 |
| (3) 50% of salary (Bengaluru, FY 2026-27) | ₹3,00,000 |
| Exempt HRA (least) | ₹3,00,000 |
| Same employee at the 40% limit (pre-April 2026 Bengaluru / non-metro) | ₹2,40,000 |
HRA exemption by monthly rent: metro vs non-metro
Basic + DA ₹60,000 a month, HRA ₹24,000 a month (annual figures):
| Monthly rent | Exempt — 8 metros (50%) | Exempt — elsewhere (40%) | Taxable HRA (metro) |
|---|---|---|---|
| ₹15,000 | ₹1,08,000 | ₹1,08,000 | ₹1,80,000 |
| ₹20,000 | ₹1,68,000 | ₹1,68,000 | ₹1,20,000 |
| ₹25,000 | ₹2,28,000 | ₹2,28,000 | ₹60,000 |
| ₹30,000 | ₹2,88,000 | ₹2,88,000 | ₹0 |
| ₹40,000 | ₹2,88,000 | ₹2,88,000 | ₹0 |
| ₹50,000 | ₹2,88,000 | ₹2,88,000 | ₹0 |
At low rent, "rent − 10% of salary" is the binding limit; at high rent, the HRA received or the 50%/40% cap binds.
Chart: where the city rule matters
Is HRA enough to make the old regime worth it?
HRA is often the largest old-regime deduction. Illustration for ₹18 lakh gross salary (salaried, below 60): with ₹1.5 lakh 80C + ₹25,000 80D + the HRA from the Bengaluru example (₹3,00,000), old-regime deductions total ₹4,75,000 and old-regime tax is about ₹2,02,800, against about ₹1,50,800 under the new regime (both incl. 4% cess). Run your own numbers in the old vs new tax regime calculator and read the tax regime guide.
When the new city rule helps, and when it doesn't
Illustration, Bengaluru: basic ₹60,000 a month, HRA ₹30,000, rent ₹25,000. The three limits are HRA received (₹30,000), rent minus 10% of basic (₹19,000) and 50% of basic (₹30,000). The lowest is ₹19,000, so the city change makes no difference here.
Now raise rent to ₹35,000. Rent minus 10% of basic becomes ₹29,000. Under the old 40% limit you'd have been capped at ₹24,000; at 50% you get ₹29,000. That's ₹60,000 more exempt in a year. The rule helps people whose rent is high relative to their basic.
The mistake I see: paying “rent” to parents on paper, with no transfer and no rental income in their return. If you rent from family, pay by bank transfer, get a rent agreement, and make sure they declare it.
Frequently asked questions
How is HRA exemption calculated for FY 2026-27?
Under Rule 279 of the Income-tax Rules, 2026, the exempt HRA is the least of: (1) actual HRA received; (2) rent paid minus 10% of salary; (3) 50% of salary if you live in Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune or Ahmedabad, otherwise 40%. Salary means basic plus DA (if it forms part of retirement benefits) for the period you rented.
Which cities get 50% HRA exemption from April 2026?
Eight cities: Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad. Bengaluru, Hyderabad, Pune and Ahmedabad were added by the Income-tax Rules, 2026 (CBDT Notification No. 22/2026, G.S.R. 198(E), 20 March 2026), effective from 1 April 2026. All other places, including Gurugram and Noida, remain at 40%.
Can I claim HRA under the new tax regime?
No. HRA exemption is available only if you opt for the old tax regime. Under the new regime (the default), HRA is fully taxable, but you get lower slab rates and a ₹75,000 standard deduction. Use the old vs new regime calculator to compare.
How much HRA can I claim on ₹35,000 rent in Bengaluru?
Example: basic ₹50,000 a month, HRA ₹25,000 a month, rent ₹35,000 a month. Rent minus 10% of salary = ₹3,60,000; 50% of salary = ₹3,00,000; HRA received = ₹3,00,000. Exempt HRA = ₹3,00,000 a year. Before April 2026 Bengaluru used the 40% limit, which would have capped the exemption at ₹2,40,000 — ₹60,000 more of your HRA is now tax-free under the old regime.
Do I need my landlord's PAN for HRA?
Yes, if annual rent exceeds ₹1 lakh, your employer needs the landlord's PAN. From FY 2026-27 the declaration form (Form 124 under the new Rules, replacing Form 12BB) also asks for your relationship with the landlord. Keep rent receipts and a rent agreement.
Can I pay rent to my parents and claim HRA?
You can, if the arrangement is genuine: a rent agreement, actual payments (preferably by bank transfer), and your parent declares the rent as income. Rent paid to a spouse is usually challenged. The new relationship disclosure makes such arrangements more visible, so documentation matters.
What if I don't receive HRA but pay rent?
Under the old regime, a separate deduction for rent paid exists for those who receive no HRA (Section 80GG under the 1961 Act, with lower limits). This calculator covers the HRA exemption for salaried employees who receive HRA.
Educational tool only — not investment, tax or legal advice. Figures are formula-based illustrations using the stated assumptions; actual outcomes depend on notified rates, rules and your specific facts. Verify with official sources or a qualified professional before acting. Findost (findost.io) and PaisaGuru by Findost are not affiliated with Findoc, FinDost, or other similarly named brands. PaisaGuru is the AI wealth concierge of Findost.