The annual shortcut is wrong more often than people think
Section 10(13A) exempts the least of three amounts: the HRA actually received, rent paid minus 10% of basic salary, and 50% of basic in the four metros or 40% elsewhere. Almost every calculator online applies that test once, to annual totals.
That gives the right answer only when nothing changed all year. The moment anything moves — a rent increase in October, a transfer from Pune to Mumbai, an April hike, three months living with family paying no rent — the annual method and the correct month-wise method give different numbers.
The difference is not always small, and it does not reliably favour the taxpayer. Someone who paid high rent in a metro for six months and then moved home rent-free will find the annual shortcut inflates their exemption substantially, which is a problem in the other direction: it is the assessing officer who finds it, later.
Which of the three tests is binding
Knowing your exemption is one thing; knowing what is limiting it is more useful. If the binding test is 'rent minus 10% of basic', paying more rent increases your exemption. If it is '50% of basic', it does not — you have already hit the ceiling and additional rent buys you nothing in tax terms.
If it is 'HRA received', the limit is your salary structure rather than your housing, and the fix is a conversation with HR rather than with your landlord.
The month-wise table names the binding test for each month, which is the difference between a number and something you can act on.
What the metro definition covers
For HRA purposes the metros are Delhi, Mumbai, Kolkata and Chennai — and only those four. Bengaluru, Hyderabad, Pune and Gurugram are non-metro for this section regardless of rents, which surprises people every year.
The classification follows where you live, not where your office is registered. If you moved mid-year, the month-wise mode lets you set the city per month, which is the only way to get this right.
Documentation you will be asked for
Rent receipts for the year, a rent agreement, and — where annual rent exceeds ₹1,00,000 — the landlord's PAN on Form 12BB. Without the PAN, employers routinely disallow the exemption at source, and recovering it means claiming at filing and answering questions.
Rent paid to a parent is allowed, provided it is genuine: real payments through a bank, a real agreement, and the parent declaring the rental income. Rent paid to a spouse is contested and generally not worth attempting.