HRA exemption: what changes between metro and other cities?
Understand the three HRA limits, qualifying salary, city treatment and why the full rent is not necessarily exempt.
Paying rent does not make the whole amount an HRA exemption. Under the FY 2025–26 old-regime rules used in our HRA exemption calculator, the exemption is limited by three quantities. The smallest one controls the result.
Read the three limits together
| Limit | What to enter or calculate |
|---|---|
| HRA received | The allowance actually received for the relevant period |
| Rent less a salary share | Rent paid minus 10% of qualifying salary, floored at zero |
| Location-based salary share | 50% or 40% of qualifying salary |
Qualifying salary includes basic pay, DA where it forms part of retirement benefits, and qualifying turnover-based commission. It is not automatically the entire gross salary or CTC. The Income Tax Department’s salary guidance explains the allowance treatment.
A location comparison you can reproduce
Suppose annual qualifying salary is ₹6,00,000, HRA received is ₹3,00,000, and rent paid is ₹3,60,000. Rent minus 10% of salary is ₹3,00,000. The location-based limit is ₹3,00,000 at 50%, or ₹2,40,000 at 40%. The exempt HRA is therefore ₹3,00,000 in the first case and ₹2,40,000 in the second.
The remaining taxable HRA is zero or ₹60,000 respectively. That ₹60,000 is a difference in taxable income, not automatically a ₹60,000 difference in tax. To measure its tax effect, put the exemption into the regime comparison.
Metro is a defined list for this year
The 50% limit applies to rented accommodation in Delhi, Mumbai, Kolkata or Chennai under the rules used here. Other locations use 40%. Cost of living, population and a city’s informal metro label do not determine the percentage.
Keep changing periods separate
If you move city, receive a salary change, start receiving HRA midway through the year or change rent, a single annual minimum can hide the differences between periods. Calculate consistent periods separately and retain the workings. Do not claim rent for months when it was not paid.
Keep the relevant salary, rent and supporting records. The calculator does not verify tenancy arrangements or documentation. No rent means zero exemption in this model, and the HRA exemption does not apply under the new regime for this year.
Connect the answer to your decision
Use the result to compare tax regimes, then inspect cash with the take-home estimate. If the larger question is whether to own or rent, the rent-versus-buy calculator examines a different question: long-term wealth after housing costs. That housing model does not automatically include an HRA tax benefit.
Put the idea into numbers.
Open the hra exemption calculator →