Why HRA trips people up
House Rent Allowance exemption under Section 10(13A) is not a percentage of anything. It is the least of three separate amounts: the HRA your employer actually pays you, half your basic salary if you live in a metro or 40% if you do not, and the rent you paid less 10% of your basic salary. Whichever of those three is smallest is your exemption, and the other two are irrelevant.
That structure is why two people with identical salaries can have wildly different exemptions, and why raising the HRA component of your salary sometimes changes nothing at all. If the third amount is the smallest, the only thing that moves your exemption is the rent you actually pay.
Metro means four cities and nothing else
For this section, metro means Delhi, Mumbai, Kolkata and Chennai. That is the complete list. Bengaluru, Hyderabad, Pune, Gurugram and Noida are all non-metro for HRA purposes, which means the salary-based amount is 40% of basic rather than 50%.
This is the single most expensive misconception in Indian salary tax, and it goes in the same direction every time: people in Bengaluru assume they get the metro rate, claim more than they are entitled to, and find out during assessment. The distinction has nothing to do with how expensive the city is.
- Metro for HRA: Delhi, Mumbai, Kolkata, Chennai
- Non-metro: every other city, including Bengaluru and Hyderabad
- Basic means basic plus dearness allowance where DA enters retirement benefits
- Rent paid less 10% of basic floors at zero - it never becomes negative
It only exists under the old regime
The new tax regime does not permit an HRA exemption at all, so a new-regime taxpayer's exemption is nil no matter how much rent they pay. That is frequently the single largest reason the old regime still wins for someone renting in a city, and it is worth quantifying before you choose a regime rather than after.
What it will not do
It will not generate rent receipts, and it will not tell you that a particular rent figure is safe from scrutiny. We compute the exemption from what you tell us; whether your declaration is supportable depends on receipts, a rent agreement and, above ₹1 lakh a year, your landlord's PAN.
It also does not cover Section 80GG, the deduction available to someone who pays rent but receives no HRA. That is a different section with a different and much smaller formula, and folding it in here would obscure both.