HRA Calculator — FY 2025-26 & FY 2026-27 (Notified 8-Metro-City Rule)
HRA Exemption Calculator
Last updated: 16 July 2026 · Reviewed by [CA Name], Chartered Accountant · 11 min read
Use this free HRA calculator to work out your exact House Rent Allowance tax exemption under Section 10(13A) / Rule 2A — now updated for the notified 8-city metro classification that took effect from FY 2026-27. As an HRA exemption calculator, it also compares old regime vs new regime instantly so you can see which one actually saves you more.
[CALCULATOR WIDGET STAYS HERE — inputs unchanged: Financial Year toggle, Regime toggle, Basic Salary, DA, HRA Received, Rent Paid, City dropdown]
Quick Answer: What’s Changed for FY 2026-27?
From 1 April 2026, four more cities — Bengaluru, Hyderabad, Pune, and Ahmedabad — qualify for the higher 50% HRA exemption cap, up from 40% earlier. This is the 8 city HRA rule, and it comes from Rule 279 of the Income-tax Rules, 2026, notified by the CBDT via Notification No. G.S.R. 198(E) on 20 March 2026 and in force since 1 April 2026, under the new Income-tax Act, 2025. This isn’t a proposal still under discussion — it’s final and already governing FY 2026-27 payroll. If you’re filing your FY 2025-26 return (due July 2026), this doesn’t apply yet — the old 4-metro rule (Delhi, Mumbai, Kolkata, Chennai) governs that return. The new 8-city rule only affects salary and rent paid from April 2026 onward, i.e., your FY 2026-27 return.
What Is HRA Exemption?
House Rent Allowance (HRA) is the part of your salary your employer pays to help cover rent — and Indian tax law lets you exclude a portion of it from taxable income if you actually live in rented accommodation. It’s one of the largest legitimate deductions available to salaried employees, often worth ₹50,000 to ₹4+ lakh a year depending on your salary and city.
The exemption sits under Section 10(13A) read with Rule 2A of the Income-tax Rules — but there’s a nuance worth knowing: the Income-tax Act, 1961 was replaced by the Income-tax Act, 2025, effective 1 April 2026. Under the new Act, exempt incomes have moved out of the standalone “Section 10” of the 1961 Act and into Schedule II of the Income-tax Act, 2025. In practice this changes almost nothing about how much you can claim — the formula and city classifications are preserved — but it does change which law you cite:
- Filing FY 2025-26 (AY 2026-27) by July 2026? Use Section 10(13A) of the Income-tax Act, 1961 — this is what still governs that year.
- Earning HRA from April 2026 onward (FY 2026-27)? That income falls under the Income-tax Act, 2025 framework (Schedule II), where the metro-city expansion also applies.
⚠️ HRA exemption is available only under the old tax regime. Under the HRA new tax regime treatment, your entire HRA is fully taxable, regardless of which city you live in. Always compare both regimes before filing (see the comparison table further down).
The HRA Calculation Formula (Rule 2A / Rule 279) — Least of Three
This is the HRA calculation formula the exemption is built on. Your exempt HRA is the lowest of these three amounts:
Condition A = Actual HRA received from employer
Condition B = 50% × (Basic + DA) → metro cities
= 40% × (Basic + DA) → non-metro cities
Condition C = Rent Paid − 10% × (Basic + DA)
HRA Exempt = MIN (Condition A, Condition B, Condition C)
“Salary” here means Basic Salary + Dearness Allowance (DA) that forms part of retirement benefits + any turnover-linked commission. It excludes HRA itself, special allowances, bonuses, or reimbursements.
Anyone without HRA in their salary structure — freelancers, self-employed individuals, or employees whose CTC doesn’t include an HRA component — can still claim rent relief under Section 80GG, capped at the lowest of ₹5,000/month (₹60,000/year), 25% of total income, or rent paid minus 10% of income. It’s a different, smaller benefit than Section 10(13A), and it requires filing a signed Form 10BA declaration by your ITR due date to claim it — a step people often miss.
Worked Example 1 — Mumbai (Existing Metro, Unaffected by the New Rule)
Mr. Arjun Sharma, Senior Engineer, Mumbai — FY 2025-26
| Component | Monthly | Annual |
|---|---|---|
| Basic Salary | ₹60,000 | ₹7,20,000 |
| DA | ₹0 | ₹0 |
| HRA Received | ₹24,000 | ₹2,88,000 |
| Rent Paid | ₹22,000 | ₹2,64,000 |
| Condition | Calculation | Amount |
|---|---|---|
| A — Actual HRA received | — | ₹2,88,000 |
| B — 50% of salary (Mumbai = metro) | 50% × ₹7,20,000 | ₹3,60,000 |
| C — Rent − 10% of salary | ₹2,64,000 − ₹72,000 | ₹1,92,000 |
| HRA Exempt (lowest of A, B, C) | ₹1,92,000 | |
| Taxable HRA | ₹2,88,000 − ₹1,92,000 | ₹96,000 |
| Approx. tax saved (30% slab + 4% cess, on the exempt amount) | ₹1,92,000 × 31.2% | ≈ ₹59,900 |
Worked Example 2 — Bengaluru, Before vs After the New Rule (FY 2025-26 vs FY 2026-27)
This is where the 8-city change actually matters. Use it to see whether the rule benefits your numbers — it doesn’t help everyone equally, because Condition C (the rent-linked cap) sometimes binds regardless of the city’s percentage.
Example: Basic ₹80,000/month, HRA ₹45,000/month, Rent ₹45,000/month, Bengaluru
| Condition | FY 2025-26 (Bengaluru = non-metro, 40%) | FY 2026-27 (Bengaluru = metro, 50%) |
|---|---|---|
| A — Actual HRA received (annual) | ₹5,40,000 | ₹5,40,000 |
| B — % of salary (annual salary ₹9,60,000) | 40% = ₹3,84,000 | 50% = ₹4,80,000 |
| C — Rent − 10% of salary | ₹5,40,000 − ₹96,000 = ₹4,44,000 | ₹4,44,000 |
| HRA Exempt (lowest) | ₹3,84,000 | ₹4,44,000 |
| Extra exemption from the new rule | ₹60,000 | |
| Approx. extra tax saved (30% slab + cess) | ≈ ₹18,720/year |
The takeaway: the new rule helps most when Condition B was your binding constraint (i.e., you receive relatively high HRA relative to rent). If your rent is modest compared to your HRA, Condition C may already be your limiting factor — in which case moving from 40% to 50% changes nothing. Run your own numbers in the calculator above rather than assuming the upgrade automatically means more savings.
HRA Metro Cities List 2026 — What Changes and When
| City | FY 2025-26 rate | FY 2026-27 rate (from 1 Apr 2026) |
|---|---|---|
| Delhi | 50% | 50% (no change) |
| Mumbai | 50% | 50% (no change) |
| Kolkata | 50% | 50% (no change) |
| Chennai | 50% | 50% (no change) |
| Bengaluru | 40% | 50% ↑ |
| Hyderabad | 40% | 50% ↑ |
| Pune | 40% | 50% ↑ |
| Ahmedabad | 40% | 50% ↑ |
| All other cities (Gurgaon, Noida, Jaipur, Surat, Lucknow, Indore, Chandigarh, Kochi, etc.) | 40% | 40% (no change) |
A note on the fine print: Gurgaon and Noida are part of the National Capital Region but are not on the official 8-city list — most employers apply the Delhi-NCR metro rate to them by administrative practice, but this isn’t guaranteed. If your salary structure treats Gurgaon/Noida as non-metro, confirm with your payroll/HR before assuming otherwise. This is genuinely a grey area — we’d rather tell you that than paper over it.
This is the first change to India’s HRA metro classification in over four decades. It comes from Rule 279 of the Income-tax Rules, 2026, and reflects the rise of Bengaluru, Hyderabad, Pune, and Ahmedabad as major salaried-employment and rental-cost centres. Unlike some other provisions that were still in draft as of early 2026, this one is settled: the CBDT notified the final Income-tax Rules, 2026 on 20 March 2026, and they have been in force since 1 April 2026. If your FY 2026-27 payslip still shows the old 40% cap for one of the four newly added cities, that’s a payroll lag on your employer’s end, not an open legal question — flag it with HR.
Old Regime vs New Regime: Does HRA Even Matter to You?
HRA exemption only exists under the old tax regime — this is the single biggest thing to understand about HRA and the new tax regime. Before you calculate anything, work out which regime actually saves you more — for many salaried employees earning under ~₹15 lakh with modest deductions, the new regime’s flat lower slabs plus the Section 87A rebate (which makes income up to ₹12 lakh effectively tax-free under the new regime) already win, HRA or not.
| Old Regime | New Regime | |
|---|---|---|
| HRA exemption (Sec 10(13A)) | ✅ Available | ❌ Not available — fully taxable |
| Standard deduction | ₹50,000 | ₹75,000 |
| Section 80C, 80D, home loan interest | ✅ Available | ❌ Not available |
| Best suited for | High rent + other deductions (80C, home loan, medical insurance) | Few/no deductions, simpler filing |
Rule of thumb: if your HRA exemption plus 80C/80D/home-loan deductions comfortably exceed ₹3–4 lakh a year, the old regime is usually still worth it. Below that, run both scenarios — our calculator’s regime toggle does this instantly.
Documents You Need to Claim HRA
You don’t submit these with your ITR, but your employer will ask for them before year-end to process TDS correctly, and you must be able to produce them if the Income Tax Department asks.
- Rent receipts for every month you’re claiming — name, address, amount, period, and landlord’s signature. Missing even one month’s receipt typically forfeits that month’s exemption.
- Landlord’s PAN — mandatory if your annual rent exceeds ₹1,00,000.
- Form 60 from your landlord if they don’t have a PAN, submitted to your employer (and the Income Tax Department if asked).
- Rent agreement and bank transfer records — not always mandatory, but strongly recommended as supporting evidence, especially for rent paid to relatives.
- Form 10BA — only if you’re claiming under Section 80GG instead of Section 10(13A) (i.e., you have no HRA component in your salary).
5 Ways to Maximise Your HRA Exemption (Legally)
| # | Strategy | Who it helps most |
|---|---|---|
| 1 | Structure your CTC to maximise the HRA component relative to special allowances (negotiate this at offer/appraisal time) | Anyone with salary-structure flexibility |
| 2 | Pay rent to parents who own the property — they declare it as rental income, you claim the exemption | Employees living with parents |
| 3 | Keep rent receipts for every single month without gaps | Everyone |
| 4 | If the landlord has no PAN, collect Form 60 rather than skip documentation | Renting from individuals without PAN |
| 5 | If you own a home in one city but rent in another for work, you can claim both HRA exemption and home loan interest deduction (Section 24(b)) | Employees relocated for work who still hold a home loan elsewhere |
Frequently Asked Questions
Related Guides
- What Is HRA Exemption? Complete Beginner’s Guide
- HRA Calculation Formula — Rule 2A / Rule 279 Explained with Examples
- HRA vs Rent-Free Accommodation: Which Saves More Tax?
- How to Claim HRA in Your ITR — Step by Step
- Metro vs Non-Metro HRA Rules 2026 — Full 8-City Guide
- Section 80GG: Rent Deduction When You Don’t Receive HRA
- Old vs New Tax Regime — Which Should You Choose?
Sources: Income-tax Act, 2025 (Government of India, in force from 1 April 2026); Income-tax Rules, 2026, notified by the CBDT via Notification No. G.S.R. 198(E) dated 20 March 2026 (Rule 279 — metro city classification for HRA), in force from 1 April 2026; prior Income-tax Act, 1961, Section 10(13A) and Rule 2A; Income Tax Department e-filing portal.
This calculator and article are for general guidance only and do not constitute tax advice. Confirm your specific position with a Chartered Accountant or your employer’s payroll team before making filing decisions, particularly for FY 2026-27 planning.
© 2026 MY Bharat · All calculations are indicative only. Consult a CA for personalised tax advice.