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Uses the 8-city list from the Income-tax Rules, 2026. Reviewed 27 September 2026.
Exempt HRA is the least of these three, a year
₹12,000 a month is exempt; ₹0 of your HRA stays taxable. The exemption exists only in the old regime.
Your tax-free HRA is the least of three amounts, and the calculator shows all three so you can see which one is binding:
The smallest is exempt and the rest of your HRA is taxed as salary. Knowing which limb binds tells you what would change the answer: if limb 2 binds, higher rent helps; if limb 3 binds, only a higher basic would.
Basic ₹40,000 a month, HRA ₹16,000 a month, rent ₹18,000 a month, living in Bengaluru in tax year 2026-27:
| Limb | Amount for the year |
|---|---|
| Actual HRA received | ₹1,92,000 |
| Rent paid minus 10% of basic | ₹2,16,000 minus ₹48,000 = ₹1,68,000 |
| 50% of basic (Bengaluru is now on the list) | ₹2,40,000 |
The least is ₹1,68,000, so that much is tax-free and ₹24,000 of HRA is taxable. For FY 2025-26 the third limb would have been 40%, or ₹1,92,000, which does not bind here either, so this person's exemption is unchanged. The new list matters most when limb 3 is the smallest, which happens when rent is high compared with basic.
From tax year 2026-27 the 50% list is Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. The Income-tax Rules, 2026, in force from 1 April 2026, added the last four. Gurugram, Noida, Navi Mumbai, Thane and every other city stay at 40%.
What counts is where the rented house is, not where the office is. Living in Gurugram and working in Delhi is still a 40% case. The metro vs non-metro guide covers the list and what happens when you move mid-year.
Both the 10% subtraction and the 50% or 40% cap use basic plus dearness allowance only, not gross salary or CTC. Using gross inflates every limb and is the most common mistake in HRA claims. Your basic is the first line in the earnings column of your payslip; the guide to reading a salary slip covers the rest.
The exemption only exists in the old regime. In the new regime, the default, the whole HRA is taxable and this calculation does not apply. Before you spend February collecting receipts, check which regime wins with the income tax calculator.
You declare all of this to your employer on Form 124, which replaced Form 12BB from April 2026.
The rent deduction that was section 80GG may still help. It is smaller, old regime only, and open to people who receive no HRA, capped at the least of ₹5,000 a month, 25% of total income, or rent minus 10% of total income. Details are in the section 80GG guide.
The tax-free part of your HRA is the least of three amounts: the HRA you actually received, rent paid minus 10% of basic plus DA, and 50% of basic plus DA in the eight listed cities or 40% anywhere else. Whatever is left of your HRA is taxable salary.
Eight: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. The Income-tax Rules, 2026 added the last four from tax year 2026-27, that is rent paid from 1 April 2026. Every other city stays at 40%.
No. Rent paid up to 31 March 2026 is still worked out on the old four-metro list, so for FY 2025-26 Bengaluru, Hyderabad, Pune and Ahmedabad remain 40% cities.
No. The exemption only works in the old regime. In the new regime, which is the default, all of your HRA is taxable.
Rent receipts and usually the rent agreement, declared on Form 124, which replaced Form 12BB from 1 April 2026. If your rent is more than ₹1 lakh a year you also give the landlord's PAN.
You can claim the separate rent deduction that used to be section 80GG, in the old regime only. It is the least of ₹5,000 a month, 25% of total income, or rent minus 10% of total income, and you must not own a house in the city you live in.