The rule
The three HRA tests are applied to the period during which you received HRA and lived in a rented home. Salary, HRA and rent are all counted for those months only. The calculator does this when you choose the number of months.
Worked example: 7 months in Chennai
You joined a company in Chennai on 1 September 2026 with basic pay of ₹45,000 (no DA) and HRA of ₹18,000, and you rent a flat for ₹20,000 a month. From September to March is 7 months.
| Test (for 7 months) | Amount |
|---|---|
| 1. Actual HRA received | ₹1,26,000 |
| 2. Rent paid ₹1,40,000 − 10% of salary ₹31,500 | ₹1,08,500 |
| 3. 50% of salary ₹3,15,000 | ₹1,57,500 |
| Tax-free HRA = the lowest | ₹1,08,500 |
Your tax-free HRA for FY 2026-27 is ₹1,08,500. The remaining ₹17,500 of HRA is taxable. At the 20% slab plus cess, the exemption saves about ₹22,568.
Same pay, different number of months
| Months | Test 1: HRA | Test 2: rent − 10% | Test 3: 50% | Tax-free HRA |
|---|---|---|---|---|
| 12 | ₹2,16,000 | ₹1,86,000 | ₹2,70,000 | ₹1,86,000 |
| 10 | ₹1,80,000 | ₹1,55,000 | ₹2,25,000 | ₹1,55,000 |
| 9 | ₹1,62,000 | ₹1,39,500 | ₹2,02,500 | ₹1,39,500 |
| 7 | ₹1,26,000 | ₹1,08,500 | ₹1,57,500 | ₹1,08,500 |
| 6 | ₹1,08,000 | ₹93,000 | ₹1,35,000 | ₹93,000 |
| 3 | ₹54,000 | ₹46,500 | ₹67,500 | ₹46,500 |
Because all three tests scale with the months, the exemption is simply proportional here: about ₹15,500 for each month.
Common part-year situations
- You changed jobs. Work out each job separately with its own salary, HRA and rent, for the months it covers, then add the two exemptions. Give your new employer the details so TDS is right.
- You moved city. Split the year at the move. Each part uses the 50% or 40% limit of the city you lived in at the time.
- You moved into your own home. HRA stops being exempt from the month you stop paying rent. If you have a home loan, the interest deduction may take over (old regime).
- Your rent changed mid-year. The calculator takes one rent figure; enter the average monthly rent for the period, or work out each part separately.
Telling your employer in time
Employers usually ask for rent proof between December and February so they can finalise TDS for the year. If you join late in the year, mention your rent when you submit your joining declarations. If you miss the window, there is no harm done: you can still claim the exemption when you file your income-tax return, and any extra tax deducted comes back as a refund.
Remember: HRA exemption is available only in the old tax regime. If your total rent for the year is more than ₹1,00,000, give your employer your landlord’s PAN on Form 124.
FAQ
How is HRA calculated if I paid rent for only 7 months?
Apply the three tests to those 7 months only: HRA received, rent paid minus 10% of salary, and 50% or 40% of salary, all for the same 7 months. The lowest is exempt.
What is the tax-free HRA for 7 months in Chennai with ₹45,000 basic, ₹18,000 HRA and ₹20,000 rent?
HRA ₹1,26,000; rent minus 10% of salary ₹1,40,000 − ₹31,500 = ₹1,08,500; 50% of salary ₹1,57,500. The lowest is ₹1,08,500.
I changed jobs this year. How do I claim HRA?
Calculate the exemption separately for each job and period, using that job’s salary, HRA and rent, then add them up. Share the details with your new employer or claim it in your return.
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.