TAX EXEMPTION OLD REGIME ONLY

HRA Exemption: 4 Metro Cities

House Rent Allowance is exempt only in the old regime. If you pay rent and your salary includes HRA, the exempt amount is the lowest of three figures under Section 10(13A) and Rule 2A. The department table is labelled AY 2026-27. This page is about salary in FY 2026-27. That financial year is AY 2027-28, so check that the table still matches the year you are filing.

Official sources

Employee benefits: Section 10(13A) read with Rule 2A. The exempt amount is the least of the three limits. The table labelled AY 2026-27 names Mumbai, Calcutta, Delhi, and Madras for the 50% limit.

What HRA exemption is

HRA is the part of salary your employer pays towards a rented house. In the old regime, some of that HRA is exempt if you actually pay rent for a place you live in.

block NEW REGIME — NO HRA EXEMPTION

HRA exemption is not available in the new regime. The new regime has been the default from FY 2023-24 (Finance Act 2023). To claim this exemption, opt for the old regime.

You need all three of these:

check_circle Salaried Employee

You must receive a salary, not business income. Self-employed people cannot claim HRA.

check_circle HRA in Salary

The payslip has to include HRA. If your employer does not pay HRA, there is no exemption to claim.

check_circle Actually Pay Rent

You must live in the rented place and pay the rent. Living in your own house does not qualify.

The three Rule 2A limits

The exemption is the lowest of three amounts. It cannot be higher than any one of them.

OPTION 1

Actual HRA received

The HRA your employer pays you.

OPTION 2

Rent paid − 10% of (Basic + DA)

Rent minus 10% of basic salary plus dearness allowance.

OPTION 3

50% or 40% of (Basic + DA)

50% in the four cities below. 40% in every other city.

functions

Exemption = MIN(Option 1, Option 2, Option 3)

The exemption cannot exceed the actual HRA received. If rent is low, Option 2 can be zero or negative, and the exemption is nil.

check_circle What goes into Basic + DA

Use basic salary plus dearness allowance, and only the DA that forms part of retirement benefits. Special allowance, performance bonus, and similar pay are not included.

The four 50% cities

The employees-benefits table labelled AY 2026-27 lists four cities for the 50% Rule 2A limit: Mumbai, Calcutta, Delhi, Madras. Those are Mumbai, Kolkata, Delhi, and Chennai. Bengaluru, Pune, Hyderabad, and Ahmedabad stay on the 40% limit, with every other city.

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Delhi 50% METRO

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Mumbai 50% METRO

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Chennai 50% METRO

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Kolkata 50% METRO

All other cities in India use the 40% rule for Option 3.

HRA exemption calculator

Enter annual basic, DA, HRA received, rent paid, and whether the city is one of the four above. The result is the lowest of the three Rule 2A amounts.

Rent paid to a spouse

warning OFTEN CHALLENGED

Rent paid to a spouse is often challenged as not genuine. Rule 2A does not print a spouse ban. Assessments still fail when there is no independent occupation and no payment trail.

Section 10(13A) needs actual rent for accommodation you occupy. Paying a spouse while you share the same household is hard to defend. Leave it off the claim unless a professional has reviewed the facts. The rule does not say every spouse payment is denied automatically.

close Rent to Spouse

High risk of disallowance. Agreement and transfers are not enough if you still share the home as one household.

check_circle Rent to Parents

Often allowed if the parent is the landlord, you actually occupy the house, rent is paid through the bank, and you declare it to your employer on Form 12BB.

check_circle Papers if you pay a parent

Keep a registered rental agreement, rent receipts, and bank transfer proof. If rent exceeds ₹1,00,000 a year, also keep the landlord's PAN. Without these papers, the exemption is denied.

Form 12BB

info EMPLOYER DECLARATION — FORM 12BB

Give Form 12BB to your employer to claim HRA, Section 80C, Section 80D, and similar deductions from TDS. No notification cited on this page replaces Form 12BB with a Form 124.

Form 12BB is the declaration you give your employer at the start of the financial year, or when something changes, to claim HRA and the other deductions.

Field	What Form 12BB asks	Keep with the form
Rent paid details	Yes	Rent receipts / agreement
Landlord PAN	If rent > ₹1,00,000/yr	Copy of PAN
Rent to family	Still HRA — same three limits	Agreement, bank trail, parent’s income reporting
80C declaration	Yes	Proofs for the year
80D declaration	Yes	Premium receipts

warning RENT TO PARENTS — DISCLOSE

If you pay rent to your parents, declare HRA on Form 12BB and keep the agreement plus bank proofs. Missing proofs are what usually cause the exemption to be denied. A missing Form 124 is not the reason.

What HRA exemption is

The three Rule 2A limits

The four 50% cities

HRA exemption calculator

Rent paid to a spouse

Form 12BB

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