HRA full form: house rent allowance and how the exemption works
HRA stands for house rent allowance, a salary component paid toward rent. Under the old tax regime the exempt part is the least of HRA received, rent paid minus 10% of basic, and 50% of basic in Delhi, Mumbai, Kolkata or Chennai or 40% elsewhere. The new regime taxes HRA fully.
FY 2026-27 figures, rules verified 3 Sep 2026. Numbers assume basic at 40% of CTC, employer PF inside CTC and ₹2,400 professional tax unless stated.
HRA is usually set at 40% to 50% of basic. It is paid whether or not you rent, but the tax exemption only applies if you actually pay rent and choose the old regime.
Rent above ₹1,00,000 a year requires the landlord PAN for the exemption to be applied through payroll. Rent paid to parents is allowed if it is genuinely paid and they declare it.
Because the new regime gives up the HRA exemption, high rent in a metro is one of the few situations where the old regime can still win. The HRA exemption calculator shows the exempt amount and the tax it saves.
See the figure for your own salary on the in hand calculator.
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Related terms
- Basic salary — Basic salary is the fixed core of your pay on which provident fund, gratuity and HRA exemption are calculated, typically 40% to 50% of CTC in India.
- Section 87A rebate — The section 87A rebate cancels income tax of up to ₹60,000 for anyone whose taxable income is ₹12,00,000 or less under the new regime in FY 2026-27.
- Standard deduction — The standard deduction is a flat amount removed from salary income before tax, with no proof required: ₹75,000 under the new regime and ₹50,000 under the old regime in FY 2026-27.