What is HRA?

HRA stands for House Rent Allowance. It is a component of salary given to cover rent. If you pay rent, a part of HRA can be tax-exempt under the old tax regime; the exempt amount is the minimum of three values as per income tax rules.

HRA full form

HRA = House Rent Allowance. It is common in Indian salary structures and helps reduce tax if you are a renter.

How HRA exemption is calculated

Exemption is the minimum of: (1) Actual HRA received, (2) 50% of salary (metro) or 40% (non-metro), (3) Rent paid minus 10% of salary. Only the exempt portion is not taxed; the rest is added to taxable income.

Metro vs non-metro

Metro cities (e.g. Mumbai, Delhi, Chennai, Kolkata, Bangalore, Hyderabad) use 50% of basic for the second limit; others use 40%. A salary calculator with HRA and city selection will compute the correct exemption and in-hand.