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HRA exemption for 2026-27: from rent receipts to the exempt amount

Check that the exemption applies, collect the rent records, split the year where anything changed, take the least of three amounts, then hand Form 124 to your employer. One printable page holds the figures and the paper trail.

By Bulan Sarkar · Updated

8 citiesget the 50% limit from 2026-27
₹1,00,000rent in a year: landlord PAN needed
10%of basic + DA comes off the rent
Old regimethe only regime with the exemption
Quick answer

Exempt HRA is the least of three amounts, worked out for the months you actually rented: the HRA you received, rent paid minus 10% of basic plus DA, and 50% of basic plus DA if the rented home is in Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune or Ahmedabad (40% anywhere else). It applies only under the old regime. If the year's rent tops ₹1,00,000, your employer needs the landlord's PAN on Form 124. Example: basic ₹60,000 and HRA ₹30,000 a month, rent ₹35,000 in Hyderabad gives ₹3,48,000 exempt and ₹12,000 taxed.

Source: Income-tax Rules, 2026, rules 279 and 205, checked Oct 2026. Numbers only, not tax advice. The arithmetic follows the official rules; your employer's TDS and your return settle the final tax.

The decision: work out your HRA exemption yourself?

Do it yourself

Yes, if your salary slip has an HRA line, you pay rent for a home you don't own, and you file, or may file, under the old regime.

Skip it

If you have settled on the new regime, all of your HRA is taxed and there is nothing to work out. If your salary has no HRA component, this exemption does not apply.

Get help

Ask a chartered accountant if you pay rent to your spouse, own a house in the same city, live in housing your employer leases, or have a notice from the department about HRA.

The steps, in order

1Check it applies2Rent records3Split the year4Least of three5Form 124

  1. Check that the exemption applies

    Have ready:salary slip with the HRA linerent agreementyour regime choice, if made

    Three conditions apply: your salary includes HRA, you pay rent for a home you live in but do not own, and you file under the old regime, because section 202 of the Income-tax Act, 2025 switches the HRA exemption off in the new regime. If you have not picked a regime yet, work the exemption out anyway, because the regime comparison needs it.

  2. Collect the year's rent records

    Have ready:a receipt for each monthbank statement lines for the rentlandlord's name, address and PAN

    Each receipt should show the month, the amount, the address of the home, and the landlord's name and signature. Keep the bank statement lines for the same payments too. Schedule III requires that you actually pay the rent, and a transfer record shows that better than a receipt alone. If the rent for the tax year adds up to more than ₹1,00,000 (about ₹8,333 a month), rule 205 needs the landlord's name, address and PAN on Form 124.

  3. Split the year wherever something changed

    Have ready:move-in and move-out datesmonths of any rent changemonths of any pay change

    Rule 279 works on the period you actually rented. If you moved city, your rent changed, or you got a raise during the year, give each stretch its own line with its months, basic plus DA, HRA and rent. Months with no rent paid, such as time spent in your own house or with family, drop out, and the HRA for those months is taxed in full. Payroll software usually does the same sum month by month.

  4. Take the least of three for each stretch

    Have ready:the stretch lines from step 3the city of the rented home

    For each stretch, work out three figures: the HRA received; rent paid minus 10% of basic plus DA (zero if the rent is lower); and 50% of basic plus DA if the rented home is in one of the eight cities, 40% anywhere else. The lowest of the three is exempt for that stretch. Add the stretches together. Any HRA above that total is taxed as salary.

    Open the HRA Exemption Calculator

  5. Give the figures to your employer and keep the file

    Have ready:Form 124 from your employerthe worksheetreceipts and landlord PAN

    Give your employer Form 124 (it replaced Form 12BB from 2026-27) with the rent, the landlord's details and the receipts before their proof deadline, so TDS takes the exemption into account. Keep the worksheet with the receipts. Then carry the exempt figure into the old vs new regime comparison. If you miss the employer's deadline, you can still claim the exemption in your return under the old regime.

    Open the Old vs New Tax Regime Calculator

Hyderabad, 2026-27: the three limits and the exempt amountHRA received₹3,60,000Rent − 10% of basic₹3,48,00050% of basic (2026-27)₹3,60,00040% of basic (2025-26 rule)₹2,88,000₹3,48,000 exempt in 2026-27
Hyderabad, 2026-27: the three limits and the exempt amount. Basic ₹60,000 and HRA ₹30,000 a month, rent ₹35,000 a month, no DA, full year. Rent minus 10% of basic (₹3,48,000) is the lowest, so ₹3,48,000 is exempt and ₹12,000 is taxed. Under the 2025-26 rule Hyderabad got 40%, so the grey bar would have been the limit: ₹2,88,000 exempt and ₹72,000 taxed.
A mid-year move, worked as two stretchesApr to Sep: Indore, 40% cityHRA received: ₹1,20,000Rent − 10%: ₹72,000 − ₹30,000 = ₹42,00040% of ₹3,00,000 = ₹1,20,000Exempt: ₹42,000+Oct to Mar: Pune, 50% cityHRA received: ₹1,20,000Rent − 10%: ₹1,50,000 − ₹30,000 = ₹1,20,00050% of ₹3,00,000 = ₹1,50,000Exempt: ₹1,20,000Year: ₹42,000 + ₹1,20,000 = ₹1,62,000 exempt; ₹78,000 of the ₹2,40,000 HRA is taxed.
A mid-year move, worked as two stretches. Basic ₹50,000 and HRA ₹20,000 a month all year. April to September in Indore at ₹12,000 rent (40% city), October to March in Pune at ₹25,000 rent (50% city). Green marks the lowest figure in each stretch.

What goes wrong

Your rent is below 10% of basic plus DAThe second limit is then zero, so nothing is exempt, however much HRA you receive.
You use the city where you workThe 50% or 40% test looks at where the rented home is, not where the office is.
The landlord's PAN is missingAbove ₹1,00,000 of rent a year, rule 205 asks for it on Form 124. Without it your employer may leave the exemption out of TDS, and you settle it in your return.
You count months when you paid no rentOnly the rented months carry an exemption. HRA for the other months is taxed in full.
You use last year's city listUp to 2025-26 only Delhi, Mumbai, Kolkata and Chennai got 50%. A 2025-26 return still uses that four-city rule; 2026-27 uses eight cities.

Variants: what changes the steps

Renting in Bengaluru, Hyderabad, Pune or Ahmedabad

These four moved to the 50% limit from 2026-27. That helps only when the third limit is the lowest. In the Hyderabad example it adds ₹60,000 of exempt HRA; where rent minus 10% is the lowest figure, it changes nothing.

Rent paid to a parent

It can count when the arrangement is real: the parent owns the home, you actually pay the rent, and the parent shows it as income. Form 124 asks for your relationship with the landlord, so state it.

You moved city during the year

Work each stretch with its own rent and its own city percentage, then add them. The second figure shows a move from Indore to Pune on 1 October: ₹1,62,000 exempt for the year.

Your salary includes DA

If your terms of employment provide for dearness allowance, as they do for central and state government staff, add DA to basic for both the 10% and the 50% or 40% limits. Other allowances stay out.

Tips and tricks

  • Pay rent by bank transfer and put the month and the address in the remark. The statement then backs every receipt.
  • Ask the landlord for the PAN when you sign the agreement, not in January when proofs are due.
  • If you share a flat, each tenant claims only the rent they pay. Ask for receipts in your own name for your share.
  • Write down the month you moved, and any change in rent, when it happens. Rebuilt from memory in March, the year tends to lose a month or a rent change.
  • Still sorting out a 2025-26 return? Run the HRA calculator on its 2025-26 setting too, because the city list is different.

What we would do

We would keep the rent log from April, get the landlord's PAN at the start, and run the least-of-three sum twice: once now with the rent you expect, and again in January with the actual figures. Then we would send Form 124 well before the employer's cut-off. Whether the old regime is worth choosing is a separate sum, so we would carry the exempt figure into the regime comparison. We do not suggest changing where you live, or whom you pay rent to, to raise the exemption.

Free kit page

Print the working copy

HRA exemption: working copy, 2026-27, from the HRA Exemption Kit 2026-27. One A4 page with tick boxes and blanks; it prints in black and white.

Print the working copy

  • 1. Does it apply?
  • 2. Records
  • 3. Least of three, per stretch
  • 4. Hand-over

Frequently asked questions

Is HRA exempt in the new tax regime?
No. Section 202 of the Income-tax Act, 2025 removes the HRA exemption in the new regime, so all of your HRA is taxed. The exemption applies only if you file under the old regime.
Which cities get the 50% HRA limit in 2026-27?
Eight: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad, under rule 279 of the Income-tax Rules, 2026. Every other place gets 40%. Up to 2025-26 only the first four got 50%.
When do I need my landlord's PAN for HRA?
When the rent for the tax year is more than ₹1,00,000, which is about ₹8,333 a month. Rule 205 asks for the landlord's name, address and PAN on Form 124, plus your relationship with the landlord, if any.
Can I claim HRA if I pay rent to my parents?
Yes, if the rent is real: the parent owns the home, you actually pay the rent, and the parent reports it as income. Form 124 asks for your relationship with the landlord. You cannot claim HRA for a home you own.
I moved city in the middle of the year. How is HRA worked out?
Work out each stretch separately with its own rent and city percentage, then add the exempt amounts. A move from Indore to Pune on 1 October, with basic ₹50,000 and HRA ₹20,000 a month, gives ₹42,000 + ₹1,20,000 = ₹1,62,000 exempt.
What if I didn't give rent receipts to my employer?
Your employer then deducts TDS on the full HRA. Under the old regime you can still claim the exemption in your return and get the extra tax back as a refund. Keep the receipts in case the department asks for them.

The source we built this on

Income-tax Rules, 2026 (G.S.R. 198(E), 20 March 2026): rule 279 (HRA exemption) and rule 205 (Form 124, landlord PAN). Checked Oct 2026.

We read the rule text in the notified PDF on 30 September 2026 and re-confirmed the eight-city list on the department's own HRA calculator on 10 October 2026 (that page was last reviewed on 28 September 2026). The worked figures come from our HRA exemption calculator.

Also read for this page

Numbers only, not tax advice. The arithmetic follows the official rules; your employer's TDS and your return settle the final tax.

Calculators used in this system

HRA Exemption CalculatorOld vs New Tax Regime CalculatorIncome Tax CalculatorCTC to In-Hand Salary CalculatorAll money & tax calculators