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HRA calculator
If you live in rented accommodation and receive house rent allowance, part of it can be exempt from tax under the old regime.
The three-way test
The exempt amount is the lowest of three figures:
- The HRA your employer actually paid.
- Rent paid minus 10% of salary.
- 50% of salary in the cities notified for the higher limit, or 40% elsewhere.
Salary here means basic pay plus dearness allowance where it counts for retirement benefits. With a basic of ₹6,00,000, HRA of ₹2,40,000 and rent of ₹3,00,000 in a 50% city, the three figures are ₹2,40,000, ₹2,40,000 and ₹3,00,000, so the full ₹2,40,000 is exempt.
Before you rely on it
The exemption is not available in the new tax regime, so compare both regimes with the income tax calculator. Keep rent receipts and the rental agreement; if annual rent exceeds ₹1 lakh your employer will ask for the landlord’s PAN. Check the current list of cities that qualify for the 50% limit, as it has been revised.
Questions
Can I claim HRA while paying rent to my parents?
Yes, if the arrangement is real: there is a rent agreement, payments are made by bank transfer and your parent declares the rent as income.
Can I claim both HRA and home loan interest?
Yes, where you rent in one place and own a home elsewhere, or cannot live in your own home for a genuine reason such as work location.