TAX EXEMPTION OLD REGIME ONLY

HRA Exemption: 4 Metro Cities

House Rent Allowance is exempt from tax only under Old Regime. If you pay rent and your salary includes HRA, you can claim exemption on the minimum of three amounts under s.10(13A) read with Rule 2A. The department table is labelled AY 2026-27 on the CBDT site; FY 2026-27 is AY 2027-28 — check that the table still matches the year you are filing.

What is HRA Exemption?

HRA (House Rent Allowance) is a component of your salary that your employer pays to cover rental accommodation costs. Under the Old Tax Regime, a portion of HRA is exempt from income tax if you actually pay rent for accommodation.

block NEW REGIME — NO HRA EXEMPTION

HRA exemption is not available under the New Regime (default from FY 2023-24, Finance Act 2023). You must opt for the Old Regime to claim this benefit.

To claim HRA exemption, you must meet all three conditions:

check_circle Salaried Employee

You must receive a salary (not business income). Self-employed individuals cannot claim HRA.

check_circle HRA in Salary

Your salary structure must include HRA as a component. If your employer doesn't provide HRA, you cannot claim exemption.

check_circle Actually Pay Rent

You must actually reside in rented accommodation and pay rent. Living in your own house does not qualify.

Rule 2A: The Three Limits

The HRA exemption is calculated as the minimum of three amounts. You cannot get exemption higher than any one of these:

OPTION 1

Actual HRA received

The HRA component your employer pays you.

OPTION 2

Rent paid − 10% of (Basic + DA)

Rent minus 10% of your basic salary plus dearness allowance.

OPTION 3

50% or 40% of (Basic + DA)

50% for metro cities, 40% for non-metro cities.

functions

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

The exemption cannot exceed the actual HRA received. If rent is low, Option 2 may be zero or negative — you get no exemption.

check_circle Key Detail

Basic + DA is your basic salary plus dearness allowance (only DA forming part of retirement benefits). Special allowance, performance bonus, etc. are NOT included in the calculation.

4 Metro Cities (Rule 2A)

The official employees-benefits table (AY 2026-27) still lists only four cities for the 50% Rule 2A arm: Mumbai, Calcutta, Delhi, Madras. Bengaluru, Pune, Hyderabad, and Ahmedabad stay on the 40% non-metro arm.

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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 in the HRA exemption calculation.

HRA Exemption Calculator

Enter your salary details to calculate your HRA exemption under Rule 2A.

Rent to Spouse Warning

warning HRA EXEMPTION DENIED

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 payment trail.

s.10(13A) needs actual rent for accommodation you occupy. Paying a spouse while sharing the same household is a high-risk fact pattern — keep it off the claim unless a professional has reviewed the facts. This page does not invent a statutory automatic denial.

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, rent is paid through the bank, and you declare it to your employer on Form 12BB.

check_circle Documentation Matters

Even for rent paid to parents, maintain: (1) registered rental agreement, (2) rent receipts, (3) bank transfer proof, (4) landlord's PAN if rent exceeds ₹1,00,000/year. Failure to provide these = exemption denied.

Form 12BB disclosure

info EMPLOYER DECLARATION — FORM 12BB

You still give Form 12BB to your employer to claim HRA, 80C, 80D, and similar deductions from TDS. This page does not treat a “Form 124” replacement as enacted without a cited notification.

Form 12BB is the declaration you submit to your employer at the beginning of the financial year (or when there's a change) to claim tax-saving deductions including HRA exemption.

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 — not a missing “Form 124” — is what usually kills the exemption.

What is HRA Exemption?

Rule 2A: The Three Limits

4 Metro Cities (Rule 2A)

HRA Exemption Calculator

Rent to Spouse Warning

Form 12BB disclosure

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