Understanding HRA Exemption: Is It Fully Tax-Free or Are There Limits?

HRA Exemption from Income Tax

Is HRA fully exempt from income tax? If not, what is the limit?

HRA Tax Exemption

HRA exemption is calculated as the actual rent paid minus 10% of your basic salary, which will be eligible for tax exemption.

Regards

HRA Exemption Details

HRA is exempted in the following way:

1. In metro cities - 50% of Basic (Mumbai, Kolkata, Chennai, and Delhi)
In non-metro cities - 40% of Basic

2. Actual HRA received from the company as a part of salary/remuneration.

3. Actual Rent paid minus 10% of the Basic salary.
(Basic salary for this purpose is Basic + DA forming part + commission on sale on a fixed percentage)

Whichever is lesser from the above three (1, 2, or 3) is exempted from income tax.