HRA Exemption Explained: How to Calculate It and Save Tax
Under Section 10(13A) and Rule 2A, your exempt HRA is the lowest of three statutory amounts: actual HRA received, 50% of basic salary (40% in non-metros), or actual rent paid minus 10% of basic. For an employee with ₹50,000 monthly basic receiving ₹25,000 HRA and paying ₹20,000 rent in a metro, exempt HRA is ₹15,000 monthly (₹1,80,000/year). In the top 30% tax bracket (+ 4% cess), this saves ₹56,160 in tax, or ₹37,440 in the 20% bracket.