How to Calculate HRA in Salary: A Practical Salary Breakdown

No image 5paisa Capital Ltd - 1 min read

Last Updated: 11th December 2025 - 12:45 pm

If you’re a salaried employee, you’ve probably noticed HRA mentioned in your payslip, yet most people never look into how to calculate HRA in salary. This can be a missed opportunity because a correct calculation can reduce your taxable income significantly. The good news is that the steps are easier than they appear once you understand what influences the exemption.

HRA mainly depends on your basic salary, the rent you pay, and whether you live in a metro or non-metro city. These are the core parts of the HRA salary calculation, and they work together to decide how much of your allowance becomes tax-exempt. A lot of people are surprised by how much difference the metro rule alone makes, especially in cities where rent consumes a big chunk of income.

To get a clearer picture, many people look up a simple HRA example in salary because seeing the numbers helps. Typically, you compare three values, the actual HRA your employer gives, the rent you pay minus 10% of your basic salary, and the city-based percentage limit. The lowest among these becomes the exempt amount. Once you’ve done this a couple of times, the process feels far more manageable and much less like tax jargon.

Another area people sometimes ignore is documentation. You can claim taxable and exempt HRA correctly only if you actually live in rented accommodation and maintain basic records like rent receipts or your landlord’s details. These small steps avoid last-minute confusion at the time of filing and help ensure you’re claiming the right amount.

Understanding how to calculate HRA in salary gives you more clarity about your income structure and helps you plan taxes smarter. 

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