HRA Exemption Explained: How Much Rent Is Tax-Free?

By the MyTaxLocker Team · Updated 11 June 2026

If you receive a House Rent Allowance and actually pay rent, part of that allowance is exempt from tax under the Old regime. The exemption isn't simply "your rent"; it's the lowest of three figures.

The least-of-three rule

Your HRA exemption is the smallest of these three amounts:

1. The actual HRA your employer pays you;
2. Rent paid minus 10% of your salary; and
3. 50% of salary if you live in a metro city (Delhi, Mumbai, Kolkata, Chennai), or 40% of salary if you live anywhere else.

Whichever of the three is lowest is the exempt amount; the rest of your HRA is taxable.

What "salary" means here

For the HRA calculation, "salary" generally means your basic pay plus dearness allowance (and commission if it's a fixed percentage of turnover) — not your entire CTC. Using the wrong salary base is one of the most common HRA mistakes.

Proof you'll need

• Rent receipts for the rent you paid.
• Your landlord's PAN if your annual rent crosses ₹1 lakh.
• A rental agreement is good supporting evidence.

No HRA? There's still Section 80GG

If you pay rent but don't receive an HRA component — for instance, you're self-employed, or your salary has no HRA — you may instead claim a deduction under Section 80GG, which has its own separate limit.

Remember the regime

The HRA exemption applies only under the Old regime. Under the New regime, it isn't available, so a large HRA claim is one factor that can tip the Old-vs-New decision toward the Old regime.