How the HRA exemption works
If your employer pays you House Rent Allowance and you live in rented accommodation, part of the HRA is tax-free. The exempt amount is the least of three figures for the months you received HRA and paid rent:
- Actual HRA received.
- Rent paid minus 10% of salary.
- 50% of salary in the listed cities, 40% anywhere else.
Salary here means basic pay plus dearness allowance if your terms of employment treat DA as salary; all other allowances and perquisites are left out.
| FY 2025-26 | FY 2026-27 onwards | |
|---|---|---|
| Law | Income-tax Act, 1961 s.10(13A), Rule 2A | Income-tax Act, 2025 Schedule III (Sl. No. 11), Rule 279 of Income-tax Rules, 2026 |
| 50% cities | Mumbai, Delhi, Kolkata, Chennai | Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad |
| Everywhere else | 40% | 40% |
| Rent minus | 10% of salary | 10% of salary |
| Proof form | Form 12BB | Form 124 (also asks your relationship with the landlord) |
| New tax regime | Not allowed | Not allowed |
The Income-tax Rules, 2026 were notified by the CBDT on 20 March 2026 and apply from 1 April 2026, together with the Income-tax Act, 2025. The formula itself and the 10% rule did not change; only the list of 50% cities and the proof form did. HRA exemption is available only in the old regime. The new regime (the default) gives no HRA exemption, so compare both regimes before choosing.
Related guides and examples
FAQ
Is Bengaluru a metro for HRA in 2026?
Yes, from FY 2026-27. Rule 279 of the Income-tax Rules, 2026 gives the 50% limit to Bengaluru, Hyderabad, Pune and Ahmedabad as well as Mumbai, Delhi, Kolkata and Chennai. For FY 2025-26 these four cities still use 40%.
How much HRA is exempt with ₹40,000 basic, ₹20,000 HRA and ₹25,000 rent in Bengaluru?
For 12 months: actual HRA ₹2,40,000; rent minus 10% of salary ₹3,00,000 − ₹48,000 = ₹2,52,000; 50% of salary ₹2,40,000. The least is ₹2,40,000, so all HRA is tax-free in FY 2026-27. In FY 2025-26 (40% limit) only ₹1,92,000 was exempt.
Can I claim HRA in the new tax regime?
No. HRA exemption is allowed only if you choose the old regime. In the new regime the full HRA is taxable.
Do I need my landlord’s PAN?
Yes, if the rent you pay in the year is more than ₹1,00,000. From FY 2026-27 you also state your relationship with the landlord, if any, on Form 124.
Sources (checked 5 Nov 2026): Rule 279, Income-tax Rules, 2026 (incometaxindia.gov.in/w/rule-279-1); Income-tax Act, 2025 Schedule III Table Sl. No. 11; CBDT notification of the Income-tax Rules, 2026 dated 20 Mar 2026, in force 1 Apr 2026; Income-tax Act, 1961 s.10(13A) and Rule 2A (FY 2025-26). Cross-checked with ThePrint, Upstox and Mondaq reports on the final rules.