Key facts at a glance
Metro rate
50% of Basic
Delhi, Mumbai, Kolkata, Chennai only
Non-metro rate
40% of Basic
Includes Bengaluru, Hyderabad, Pune
Available under
Old Regime only
New Regime disallows this exemption
On a ₹9,00,000 Basic salary with ₹4,50,000 HRA received and ₹4,80,000 rent paid, a metro resident's exempt HRA is ₹3,90,000, while an otherwise-identical non-metro resident's is ₹3,60,000. Same rent, same HRA, same Basic, a ₹30,000 difference purely from which of Section 10(13A)'s three limits happens to bind.
On a ₹15,00,000 gross salary, that exemption is worth roughly ₹1,21,680 in actual tax saved, but only under the Old Regime, the New Regime disallows this exemption entirely, exactly the kind of large, situation-specific number that can flip which regime actually wins for a given person.
Compare New vs Old Regime with your own real numbers.
Open the India calculatorThe "least of three" rule, and why it changes person to person
Section 10(13A) exempts the smallest of three amounts: actual HRA received, 50% (metro) or 40% (non-metro) of Basic salary, or rent paid minus 10% of Basic. This isn't a formula that gives the same shape of answer for everyone, which of the three limits actually binds depends entirely on the relationship between your specific Basic, HRA, and rent figures, two people in the same city with different rent-to-salary ratios can have completely different binding constraints.
Only Delhi, Mumbai, Kolkata, and Chennai qualify as "metro" for the 50% rate, a narrower definition than most people assume. Major tech hubs like Bengaluru, Hyderabad, and Pune, despite genuinely metro-level rents, fall under the 40% non-metro rate instead, worth knowing before assuming your city qualifies for the higher limit.
New Regime disallows this exemption entirely
This is one of the biggest, most consequential differences between the two regimes for anyone paying real rent, our New vs Old Regime explainer covers the broader trade-off. The New Regime's lower headline slab rates win for most people claiming minimal deductions, but a genuinely large HRA exemption, especially in a high-rent city on a mid-size salary, can be worth more than the New Regime's rate advantage, tipping the comparison back toward the Old Regime for that specific person.
On the worked ₹15,00,000 example above, the exemption alone is worth ₹1,21,680 in tax saved under Old Regime, a number large enough to change which regime nets more, run your own real Basic, HRA, and rent figures rather than assuming the New Regime automatically wins.
See which regime actually wins for you
Run your real salary, Basic, and rent figures through the full New vs Old Regime comparison.
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Frequently asked questions
How is the HRA exemption actually calculated?
Section 10(13A) takes the LEAST of three amounts: (1) the actual HRA you received, (2) 50% of Basic salary if you live in a metro (Delhi, Mumbai, Kolkata, Chennai) or 40% if non-metro, or (3) the rent you actually paid for the year minus 10% of Basic. Whichever of the three is smallest becomes your exempt amount, the rest of the HRA you received is fully taxable as ordinary salary income.
Why did the metro and non-metro examples land on different binding constraints?
Because which of the three limits is smallest depends on your specific numbers, and it genuinely varies by situation, not just city type. On ₹9,00,000 Basic, ₹4,50,000 HRA received, and ₹4,80,000 rent paid, a metro resident's binding constraint is rent-minus-10%-of-Basic (₹3,90,000, since 50% of Basic is ₹4,50,000, higher), while an otherwise identical non-metro resident's binding constraint is 40% of Basic (₹3,60,000, since that's now the smallest of the three). Same rent, same HRA, same Basic, different exempt amount purely from the metro/non-metro classification.
Which cities actually count as 'metro' for this 50% rate?
Only four: Delhi, Mumbai, Kolkata, and Chennai. Every other city in India, including major tech hubs like Bengaluru, Hyderabad, and Pune, uses the 40% rate, not the 50% one. This is a common point of confusion since those cities have genuinely metro-level rents, but the tax rule's 'metro' definition is narrower and hasn't been updated to match.
Can I claim HRA exemption under the New Tax Regime?
No. This is one of the most consequential differences between the two regimes for salaried employees paying real rent. The New Regime disallows the HRA exemption along with most other Chapter VI-A deductions, our New vs Old Regime explainer covers the broader trade-off. If your rent is substantial relative to your salary, this exemption alone can be large enough to tip the Old Regime back in your favor, even though the New Regime wins for most people with minimal deductions.
How much tax does the HRA exemption actually save, in real terms?
On a ₹15,00,000 gross salary (Old Regime) with a ₹3,90,000 exempt HRA amount (the metro example above), the exemption reduces tax owed from roughly ₹2,57,400 to ₹1,35,720, a saving of about ₹1,21,680 for the year. This is a genuinely large number, exactly why comparing New vs Old Regime purely on headline slab rates, without factoring in a real HRA claim, can lead to the wrong conclusion for someone paying substantial rent.
What if I don't pay rent, or I own the home I live in?
You get no HRA exemption at all in that case, regardless of how much HRA your employer pays you as part of CTC, since one of the three constraints (rent paid minus 10% of Basic) would be zero or negative if you're not actually paying rent. HRA received without corresponding rent paid becomes fully taxable salary income, structuring compensation with an HRA component only genuinely helps if you're actually renting.
Does the HRA exemption interact with the CTC and gratuity/EPF mechanics covered elsewhere on this site?
It's a separate mechanic from EPF and gratuity, both of which are calculated off Basic salary and reduce your in-hand pay regardless of regime, our EPF and gratuity explainer covers those. HRA exemption instead affects your taxable income calculation specifically, and only under the Old Regime, it's one of several Chapter VI-A-adjacent claims (alongside Section 80C investments and others) that determine whether Old Regime's lower headline appeal actually beats New Regime's simpler, deduction-free structure for your specific numbers.