The three limits
| Limit | Amount |
|---|---|
| A | Actual HRA received |
| B | Rent paid − 10% of salary (basic + DA) |
| C | 50% of salary (8 specified cities) or 40% (other places) |
| Exempt HRA | Lowest of A, B and C; the rest is taxable |
50% cities
- Up to FY 2025-26: Delhi, Mumbai, Kolkata, Chennai
- From FY 2026-27: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad
Documents and conditions
- Rent receipts or a rent agreement
- Landlord's PAN if annual rent exceeds ₹1 lakh
- Rent paid to parents is allowed if genuine and they declare it as income
- Rent paid to a spouse is generally not accepted
- If you own a house in the same city and still rent, expect questions
Worked example: employee in Hyderabad, FY 2026-27
- 1Basic salary ₹9,00,000 a year; HRA received ₹3,60,000; rent paid ₹3,00,000.
- 2A = ₹3,60,000. B = ₹3,00,000 − ₹90,000 = ₹2,10,000. C = 50% of ₹9,00,000 = ₹4,50,000.
- 3Exempt HRA = lowest = ₹2,10,000; taxable HRA = ₹1,50,000.
₹2.1 lakh exempt — Hyderabad now qualifies for the 50% limit, though here limit B decides.
