What Is HRA and Why It Matters for Tax Saving?
House Rent Allowance (HRA) is a key component of your salary. Under the old tax regime, HRA can significantly reduce your taxable income if you’re paying rent and meet certain conditions.
But with the new tax regime, many salaried taxpayers are asking:
Is HRA tax exemption still available?
Can I claim both HRA and home loan benefits together?
Let’s break it down.
Can You Claim HRA Under the New Tax Regime?
❌ No, HRA exemption is not available under the new tax regime (Section 115BAC), as most deductions and exemptions—including HRA—have been removed.
✔️ Under the old regime, you can still claim HRA exemption under Section 10(13A) of the Income Tax Act, 1961.
HRA Exemption – Who Can Claim?
You can claim HRA exemption only if:
- You live in a rented house
- You receive HRA as part of your salary
- You don’t opt for the new regime
How Is HRA Exemption Calculated?
Exemption is the lowest of the following:
| Component | Value |
|---|---|
| Actual HRA received | ₹X (as per payslip) |
| 50% of salary (metro) or 40% (non-metro) | Based on location |
| Rent paid – 10% of basic salary | ₹Y (rent – 10% of salary) |
Example:
If your basic salary is ₹40,000/month and you pay ₹18,000/month rent in Chennai (non-metro):
- HRA received = ₹15,000
- 40% of salary = ₹16,000
- Rent – 10% of salary = ₹14,000
✅ HRA exemption = ₹14,000/month
Can You Claim Both HRA and Home Loan Benefits?
Yes, under the old regime, it’s possible if:
- You live in a rented house (claim HRA)
- You own a house in another city or locality (claim home loan deduction)
➡️ Claim Section 10(13A) for HRA
➡️ Claim Section 24(b) for home loan interest (up to ₹2 lakh/year)
But this combo doesn’t work under the new regime.
Documents Needed to Claim HRA
To avoid tax notice, keep these ready:
- Rent receipts
- Rent agreement
- PAN of landlord (if rent > ₹1 lakh/year)
- Employer declaration (usually in Form 12BB)