{"id":6758,"date":"2024-04-23T10:23:57","date_gmt":"2024-04-23T04:53:57","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=6758"},"modified":"2026-03-09T16:33:20","modified_gmt":"2026-03-09T11:03:20","slug":"hra-calculation","status":"publish","type":"post","link":"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/","title":{"rendered":"House Rent Allowance (HRA) &#8211; Meaning, Calculation, Tax Exemption Rules"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d57bb796104\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d57bb796104\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#HRA-Meaning\" >HRA Meaning<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#HRA-Calculation-%E2%80%93-2026-Update\" >HRA Calculation &#8211; 2026 Update<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#The-%E2%80%9CDefault%E2%80%9D-Tax-Regime-FY-2025-26\" >The &#8220;Default&#8221; Tax Regime (FY 2025-26)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#The-Impact-of-Updates-on-Wages\" >The Impact of Updates on Wages<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#HRA-Calculation-Formula-%E2%80%93-How-to-Calculate-HRA\" >HRA Calculation Formula &#8211; How to Calculate HRA?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#HRA-Calculation-with-Example\" >HRA Calculation with Example<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#Who-Can-Claim-Tax-Deduction-on-HRA\" >Who Can Claim Tax Deduction on HRA?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#Factors-Affecting-HRA-Calculation\" >Factors Affecting HRA Calculation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#Section-80GG-%E2%80%93-How-to-Save-Tax-If-you-Dont-Receive-HRA\" >Section 80GG &#8211; How to Save Tax If you Don&#8217;t Receive HRA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#Note-Section-80GG-deductions-are-not-valid-under-the-default-New-Tax-Regime-You-must-opt-for-the-Old-Regime-to-claim-this\" >Note: Section 80GG deductions are not valid under the default New Tax Regime. You must opt for the Old Regime to claim this.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#HRA-Exemption\" >HRA Exemption<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#HRA-in-New-Tax-Regime\" >HRA in New Tax Regime<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#Documents-Required-to-Claim-Tax-Exemption-on-HRA\" >Documents Required to Claim Tax Exemption on HRA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#Automate-HRA-calculation-using-RazorpayX-Payroll\" >Automate HRA calculation using RazorpayX Payroll<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#FAQs\" >FAQs<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#How-is-HRA-calculated-in-salary\" >How is HRA calculated in salary?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#How-is-the-HRA-exemption-calculated\" >How is the HRA exemption calculated?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#What-is-the-maximum-HRA-limit\" >What is the maximum HRA limit?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#How-to-calculate-HRA\" >How to calculate HRA?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#What-is-the-HRA-calculation-formula-in-Excel\" >What is the HRA calculation formula in Excel?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/razorpay.com\/payroll\/learn\/hra-calculation\/#Can-I-claim-HRA-by-paying-rent-to-parents\" >Can I claim HRA by paying rent to parents?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"HRA-Meaning\"><\/span><strong>HRA Meaning<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>HRA, or House Rent Allowance, is a part of an employee&#8217;s salary provided towards expenses related to rented accommodation only. HRA is deducted from taxable salary under section 10(13A)<span style=\"font-weight: 400;\">, an exemption that is now only available if you opt for the Old Tax Regime. Under the default New Tax Regime, HRA is fully taxable.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">HRA varies from city to city. It also varies depending on the cost of living in that particular city. HRA is calculated and deducted from taxable income based on the city of residence and a few other factors. However, with the Code on Wages now in effect, the definition of &#8216;Basic Salary&#8217; has changed for many, impacting how this exemption is calculated.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"HRA-Calculation-%E2%80%93-2026-Update\"><\/span><b>HRA Calculation &#8211; 2026 Update<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Under the new laws regarding salaries, two major regulatory shifts have shifted the way you should plan your HRA tax exemption. Here is what you need to know regarding the update.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"The-%E2%80%9CDefault%E2%80%9D-Tax-Regime-FY-2025-26\"><\/span><b>The &#8220;Default&#8221; Tax Regime (FY 2025-26)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The New Tax Regime is now the default setting for all employees. Under this default regime, HRA is fully taxable, which means 0% exemption.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u00a0To claim the HRA exemption, you must explicitly opt out of the default regime and choose the Old Tax Regime with your employer at the start of the financial year.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"The-Impact-of-Updates-on-Wages\"><\/span><span style=\"font-weight: 400;\">The Impact of Updates on Wages<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">With the new Labour Codes officially notified, companies are now legally required to structure &#8220;Basic Pay&#8221; as at least 50% of an employee\u2019s total Cost to Company (CTC).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Previously, companies kept Basic Salary low to maximize allowances. Now, the Basic Salary is likely going to be much higher. Since the HRA exemption formula subtracts &#8220;10% of Basic Salary&#8221; from your rent paid, a higher Basic Salary means a larger amount is subtracted. As a result, the new 50% rule slightly reduces the amount of HRA you can claim as tax-exempt compared to the old salary structures.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Check your March 2026 payslip. If your &#8220;Basic Pay&#8221; has jumped to 50% of your total pay, you are compliant with the new laws, but you may need to recalculate your tax liability.<\/span><\/p>\n<h2><\/h2>\n<h2><span class=\"ez-toc-section\" id=\"HRA-Calculation-Formula-%E2%80%93-How-to-Calculate-HRA\"><\/span><b>HRA Calculation Formula &#8211; How to Calculate HRA?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">While salary structures have changed, the mathematical formula for HRA exemption (under Section 10(13A) and Rule 2A) remains pretty much the same. The taxable portion of your HRA is the amount received minus the exempt amount. The Exempt HRA is the lowest of the following three values:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Actual HRA Received &#8211;<\/b><span style=\"font-weight: 400;\"> The exact amount your employer provides as HRA.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Rent Paid in Excess of 10% of Salary: <\/b><span style=\"font-weight: 400;\">(Total yearly rent you paid) \u2013 (10% of your Basic Salary + DA)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>City-Specific Limit:<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>50% of Salary:<\/b><span style=\"font-weight: 400;\"> If you live in a Metro city.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>40% of Salary:<\/b><span style=\"font-weight: 400;\"> If you live in any other city.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><b>Note<\/b><span style=\"font-weight: 400;\">: For this formula, &#8220;Salary&#8221; is defined strictly as Basic Pay + Dearness Allowance (DA) + Commission (if paid as a fixed percentage of turnover).<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"HRA-Calculation-with-Example\"><\/span>HRA Calculation with Example<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>HRA calculation involves determining the amount exempt from income tax. The amount of tax deduction that can be claimed over HRA is the lowest of the following:<\/p>\n<ol>\n<li><strong>Actual rent paid minus 10% of salary<\/strong><\/li>\n<li><strong>HRA received from employer\u00a0<\/strong><\/li>\n<li><strong>City-specific limit<\/strong>\n<ul>\n<li>50% of basic salary for those living in metro cities <span style=\"font-weight: 400;\">like Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad<\/span><\/li>\n<li>40% of basic salary for those not in metro cities<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<p>Let&#8217;s take the example of an employee living in Delhi.<\/p>\n<ul>\n<li>Monthly basic salary: Rs 50,000<\/li>\n<li>Dearness Allowance: Rs 10,000<\/li>\n<li>Monthly rent paid: Rs 15,000<\/li>\n<li>Monthly HRA received: Rs 12,000<\/li>\n<\/ul>\n<p>Calculating the tax-exempt HRA:<\/p>\n<ol>\n<li>Actual rent paid minus 10% of salary: 15000-5000 = 10,000<\/li>\n<li>HRA from employer: 12,000<\/li>\n<li>City specific limit: 30,000 (50% of basic salary + dearness allowance)<\/li>\n<\/ol>\n<p>The amount of tax deduction that can be claimed is the least of the above numbers, which is the <strong>actual rent paid minus 10% of salary.<\/strong><\/p>\n<p>In this example, the employee will receive HRA exemption of Rs 10,000 of his total taxable income.<\/p>\n<p>Since the Rs 10,000 of HRA is exempt from tax, it essentially lowers the amount of income the government taxes the employee on. This translates to a lower tax liability for the employee.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Who-Can-Claim-Tax-Deduction-on-HRA\"><\/span>Who Can Claim Tax Deduction on HRA?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>HRA can be claimed as tax deduction if an employee meets the following criteria:<\/p>\n<ul>\n<li>Employee is a salaried individual<\/li>\n<li>Employee should receive HRA as a salary component<\/li>\n<li>Employee should live in a rented house<\/li>\n<li>Rent receipts should be issued in the employee&#8217;s name<\/li>\n<li><span style=\"font-weight: 400;\">Employee must explicitly opt for the Old Tax Regime. <\/span><\/li>\n<li><span style=\"font-weight: 400;\">The New Tax Regime is the default for FY 2026-27 and does not allow HRA exemption.<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Factors-Affecting-HRA-Calculation\"><\/span>Factors Affecting HRA Calculation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>Salary:<span style=\"font-weight: 400;\">\u00a0Basic salary for HRA is now defined as &#8216;Wages&#8217; under the Code on Wages, 2019. It includes Basic Pay + Dearness Allowance (DA) + Retaining Allowance. If your total allowances exceed 50% of your CTC, the excess amount is added back to your Basic Salary for this calculation.<\/span><\/li>\n<li>HRA received: The actual amount of HRA received by the employee<\/li>\n<li>Actual rent paid: The amount of rent paid by the employee for his residence<\/li>\n<li>City of residence: The city in which the employee resides, which depends on whether the city is a metropolitan city or <span style=\"font-weight: 400;\">a<\/span> <span style=\"font-weight: 400;\">non-metropolitan city. This classification now includes Bengaluru, Hyderabad, Pune, and Ahmedabad as metro cities eligible for the 50% slab<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Section-80GG-%E2%80%93-How-to-Save-Tax-If-you-Dont-Receive-HRA\"><\/span>Section 80GG &#8211; How to Save Tax If you Don&#8217;t Receive HRA<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"markdown markdown-main-panel\" dir=\"ltr\">\n<p data-sourcepos=\"1:1-1:156\">If you don&#8217;t receive HRA (House Rent Allowance) from your employer, there are still ways to save tax on the rent you pay. Here are some options to consider:<\/p>\n<p data-sourcepos=\"3:1-3:17\"><strong>Section 80GG:<\/strong><\/p>\n<ul data-sourcepos=\"5:1-10:0\">\n<li data-sourcepos=\"5:1-5:184\">This section of the Income Tax Act allows salaried individuals who <strong>don&#8217;t receive HRA<\/strong> and <strong>don&#8217;t own a house<\/strong> in the city where they work to claim a deduction for the rent paid.<\/li>\n<li data-sourcepos=\"6:1-10:0\">The maximum deduction you can claim under Section 80GG is the <strong>lowest<\/strong> of the following:\n<ul data-sourcepos=\"7:5-10:0\">\n<li data-sourcepos=\"7:5-7:53\">Actual rent paid minus 10% of your basic salary<\/li>\n<li data-sourcepos=\"8:5-8:30\">25% of your total income<\/li>\n<li data-sourcepos=\"9:5-10:0\">Rs. 5,000 per month (Rs. 60,000 annually)<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p data-sourcepos=\"11:1-11:65\"><strong>Documents Required for Claiming Deduction under Section 80GG:<\/strong><\/p>\n<ul data-sourcepos=\"13:1-15:0\">\n<li data-sourcepos=\"13:1-13:52\">Rent receipts with your name and address mentioned<\/li>\n<li data-sourcepos=\"14:1-15:0\">Proof of your residence (if staying elsewhere than your parents&#8217; place)<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Note-Section-80GG-deductions-are-not-valid-under-the-default-New-Tax-Regime-You-must-opt-for-the-Old-Regime-to-claim-this\"><\/span><b>Note<\/b><span style=\"font-weight: 400;\">: Section 80GG deductions are not valid under the default New Tax Regime. You must opt for the Old Regime to claim this.<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h2><span class=\"ez-toc-section\" id=\"HRA-Exemption\"><\/span>HRA Exemption<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ol>\n<li>When the employer refuses to provide tax benefits for HRA, employees can claim these benefits at the time of filing tax returns.<\/li>\n<li>When more than 1 member of the house is contributing towards the rent, HRA related tax rebates can be claimed by all individuals as long as separate rent receipts are furnished.<\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"HRA-in-New-Tax-Regime\"><\/span>HRA in New Tax Regime<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"markdown markdown-main-panel\" dir=\"ltr\">\n<p data-sourcepos=\"1:1-1:411\">\u00a0Traditionally, salaried individuals could claim an exemption on a portion of their HRA, reducing their taxable income.<\/p>\n<p data-sourcepos=\"1:1-1:411\">Under the new tax regime, introduced in 2020, claiming HRA exemption is no longer an option. This means that the entire HRA amount received from your employer is added to your taxable income.<\/p>\n<p data-sourcepos=\"3:1-3:603\">This change simplifies the tax filing process by eliminating the need to calculate HRA exemptions.<\/p>\n<p data-sourcepos=\"3:1-3:603\">Additionally, individuals who don&#8217;t pay rent or have low rent expenses might find the new regime beneficial as they can choose the lower tax slabs offered without claiming HRA deductions.<\/p>\n<p data-sourcepos=\"3:1-3:603\">However, for those paying high rent, especially in metro cities, the loss of HRA exemption can translate to a higher tax burden.<\/p>\n<h2 data-sourcepos=\"3:1-3:603\"><span class=\"ez-toc-section\" id=\"Documents-Required-to-Claim-Tax-Exemption-on-HRA\"><\/span>Documents Required to Claim Tax Exemption on HRA<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li data-sourcepos=\"3:1-3:603\">Rent receipts with employee&#8217;s name furnished<\/li>\n<li data-sourcepos=\"3:1-3:603\">PAN details of the homeowner in case annual rent is more than 1 lakh. If the homeowner does not have a PAN, they can provide a self-declaration.<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Self-declaration of Relationship, if paying rent to immediate family.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Digital Payment Proof. Cash receipts are facing higher scrutiny, which is why bank transfer trails are recommended.<\/span><\/li>\n<\/ul>\n<h2 data-sourcepos=\"3:1-3:603\"><span class=\"ez-toc-section\" id=\"Automate-HRA-calculation-using-RazorpayX-Payroll\"><\/span><span style=\"font-size: 30.9985px; color: #111111;\">Automate HRA calculation using RazorpayX Payroll<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<\/div>\n<\/div>\n<p><span style=\"font-weight: 400;\">After reading this article, you must have understood what a house rent allowance is and how you can claim an exemption to reduce your overall tax liability. But calculating HRA individually for each employee can be very time-consuming and tiring.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">What if we told you that you could automate it for all your employees?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">RazorpayX Payroll automates the process of HRA calculation and saves your precious time. It automatically divides the employee CTC into separate components in just one click,<\/span><span style=\"font-weight: 400;\"> in compliance with the Code on Wages, 2019.<\/span><span style=\"font-weight: 400;\"> All you have to do is input the CTC and watch everything <\/span><span style=\"font-weight: 400;\">get done by the software. It also automatically handles the New vs. Old Regime selection for your employees ensuring a smooth process without any disruptions!<\/span><\/p>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/payroll.razorpay.com\/signup?r=blog_cta_HRA_Calculation\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Sign Up for free<\/a><\/div>\n<p>&nbsp;<\/p>\n<p>Other features of RazorpayX Payroll include:<\/p>\n<ul>\n<li>CTC Calculation &amp; salary preview tool<\/li>\n<li><span style=\"font-weight: 400;\">Automatic generation of HR letters<\/span><\/li>\n<li>Automatic compliance calculation &amp; filings such as PF, PT, TDS &amp; ESIC<\/li>\n<li><span style=\"font-weight: 400;\">Automated salary calculation and disbursement into bank accounts<\/span><\/li>\n<\/ul>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/payroll.razorpay.com\/signup?r=blog_cta_HRA_Calculation\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Start your plan now<\/a><\/div>\n<h2><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"How-is-HRA-calculated-in-salary\"><\/span><span style=\"font-weight: 400;\">How is HRA calculated in salary?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">HRA is typically set by employers as 40% to 50% of your Basic Salary, depending on your city&#8217;s metro status. Under the 2026 Code on Wages compliance, Basic Pay should be 50% of your total CTC, which means the HRA is calculated to fit within the remaining allowance pool. It is a fixed part of your monthly gross earnings, regardless of whether you actually pay rent or claim a tax exemption.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"How-is-the-HRA-exemption-calculated\"><\/span><span style=\"font-weight: 400;\">How is the HRA exemption calculated?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">HRA exemption is calculated based on Section 10(13A) rules, available only if you opt for the Old Tax Regime. The exemption is the lowest of three values: actual HRA received, rent paid minus 10% of salary, or 50% of salary for metro cities and 40% for others.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"What-is-the-maximum-HRA-limit\"><\/span><span style=\"font-weight: 400;\">What is the maximum HRA limit?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">There is no fixed maximum monetary limit for HRA exemption. The limit is determined by the lowest of your actual HRA, rent paid over 10% of salary, or 50% or 40% of your Basic Salary, depending on where you are based. However, this exemption is strictly for the Old Tax Regime. Under the default New Tax Regime for 2026, the entire HRA amount is fully taxable.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"How-to-calculate-HRA\"><\/span><span style=\"font-weight: 400;\">How to calculate HRA?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">To calculate your HRA exemption, first ensure you have opted for the Old Tax Regime. Compare three figures: the actual HRA received, your total annual rent minus 10% of your Basic Salary plus DA, and 50% or 40% of that salary, depending on where you live. The lowest of these three amounts is tax-exempt, while the remaining balance is added to your taxable income.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"What-is-the-HRA-calculation-formula-in-Excel\"><\/span><span style=\"font-weight: 400;\">What is the HRA calculation formula in Excel?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">You can determine the exempt amount using the MIN function. Assuming Cell A1 is Basic Salary plus DA, A2 is HRA Received, and A3 is Annual Rent, use the formula =MIN(A2, A3-(0.1*A1), 0.5*A1) for metro cities. For non-metros, change 0.5 to 0.4.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Can-I-claim-HRA-by-paying-rent-to-parents\"><\/span><span style=\"font-weight: 400;\">Can I claim HRA by paying rent to parents?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Yes, you can claim HRA for rent paid to parents. However, newregulations require stricter compliance, including a formal declaration of relationship and digital payment trails. You cannot be a co-owner of the property, and your parents must explicitly report this rental income in their own tax returns to avoid scrutiny from the tax department.<\/span><\/p>\n\t\t\t<div id=\"rank-math-rich-snippet-wrapper\" class=\"\">\n\n\t\t\t\t\n\t\t\t<\/div>\n\t\t\n","protected":false},"excerpt":{"rendered":"<p>HRA or house rent allowance is an integral part of employee salary and helps employees to avail tax benefits. This article discusses HRA calculation with an example.<\/p>\n","protected":false},"author":151156494,"featured_media":10783,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3404],"tags":[3814],"class_list":{"0":"post-6758","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-payroll","8":"tag-house-rent-allowance"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/6758","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156494"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=6758"}],"version-history":[{"count":9,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/6758\/revisions"}],"predecessor-version":[{"id":18903,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/6758\/revisions\/18903"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/10783"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=6758"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=6758"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=6758"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}