What is HRA?
HRA (House Rent Allowance) is the part of a salary in India paid towards housing. Under the old tax regime, an employee living in a rented home can treat part of it as tax-free: the lowest of the HRA received, rent paid minus 10% of basic salary, and 50% of basic salary in a listed city or 40% elsewhere. From FY 2026-27 the listed cities are Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad.
Example
With a basic salary of ₹50,000 a month, HRA of ₹25,000 and rent of ₹22,000 in a metro, the three figures are ₹25,000, ₹17,000 and ₹25,000, so ₹17,000 a month is exempt and the remaining ₹8,000 is taxed.
Related terms
GST
GST (Goods and Services Tax) is the single indirect tax India charges on most sales of goods and services. Within a state it is split equally into CGST and SGST, and on sales between states it is charged as IGST.
Inflation
Inflation is the rate at which the general level of prices for goods and services rises over time, reducing the purchasing power of money. Moderate inflation is normal in a growing economy; high inflation erodes savings.