HRA Exemption in New Tax Regime
House Rent Allowance (HRA) is one of the most important salary components that allows salaried individuals to save income tax. HRA Exemption in New Tax Regime Employers provide HRA to help employees cover rental expenses, and the Income Tax Act offers partial exemption on this amount—only under the old tax regime.
HRA Exemption in New Tax Regime But ever since the introduction of the new tax regime under Section 115BAC, there’s widespread confusion about whether HRA is still exempt from tax, whether it can be claimed alongside home loan interest, and how exactly the exemption is calculated.
This blog will help decode all your common questions about HRA exemption in the current scenario.
📌 What is House Rent Allowance (HRA)?
HRA is a component of a salaried individual’s income paid by the employer to help cover rental housing costs. HRA Exemption in New Tax Regime Under the old tax regime, a portion of HRA can be claimed as tax-exempt, depending on several factors like salary structure, actual rent paid, and city of residence.
❌ Is HRA Exemption Available Under the New Tax Regime?
No, HRA exemption is not available if you opt for the new tax regime.
HRA Exemption in New Tax Regime Section 115BAC of the Income Tax Act, which defines the new regime, disallows several common exemptions and deductions. These include:
| Section | What’s Disallowed Under New Regime |
| 10(5) | Leave Travel Allowance (LTA) |
| 10(13A) | House Rent Allowance (HRA) |
| 10(14) | Special Allowances like children’s education, uniform, etc. |
| 24(b) | Interest paid on home loan |
| 57(iia) | Deduction for family pension |
| Chapter VI-A | All deductions like 80C, 80D etc. (except 80CCD(2)) |
✅ Only Section 80CCD(2) – Employer’s contribution to NPS – is allowed in the new regime.
🏡 Can You Claim HRA and Home Loan Deduction Together Under the Old Tax Regime?
Yes, you can claim both HRA exemption and home loan interest deduction simultaneously, but only under the old tax regime. HRA Exemption in New Tax Regime
This typically applies to situations where:
- You live in a rented home in one city due to work.
- You own a house in another city or locality and are paying a home loan.
For instance:
Ravi lives in a rented apartment in Delhi due to his job, while he has purchased a house in Jaipur for which he’s paying home loan EMIs. He can claim HRA exemption for rent in Delhi and also claim deduction under Section 24(b) for interest paid on the Jaipur house loan.
📌 Important Conditions:
- There must be a genuine reason for not staying in the owned house.
- You should have rent receipts and home loan documents.
- If the owned house is let out, you must disclose the rental income.
This dual claim is perfectly legal and accepted by the Income Tax Department, as long as all declarations and documents are properly maintained.
📊 How to Calculate HRA Exemption Under the Old Regime
The Income Tax Act provides a method to calculate HRA exemption. The least of the following three amounts will be exempt:
- Actual HRA received from your employer
- 50% of salary (if living in metro cities) or 40% for non-metros
- Rent paid – 10% of salary
📌 Note:
- Salary = Basic salary + DA (if it forms part of retirement benefits)
- Metro cities = Delhi, Mumbai, Chennai, Kolkata
🧮 Example: HRA Calculation for a Metro City
Let’s say:
- Basic Salary = ₹8,00,000 annually
- HRA received = ₹3,20,000 annually
- Rent paid = ₹30,000 per month = ₹3,60,000 annually
- City = Metro (e.g., Mumbai)
Step 1: Actual HRA received
= ₹3,20,000
Step 2: 50% of basic salary (metro)
= 50% of ₹8,00,000 = ₹4,00,000
Step 3: Rent paid – 10% of salary
= ₹3,60,000 – ₹80,000 = ₹2,80,000
✅ HRA Exempted from Tax = ₹2,80,000
❌ Taxable HRA = ₹3,20,000 – ₹2,80,000 = ₹40,000
📑 Documents Required to Claim HRA Exemption
To successfully claim HRA exemption under the old regime, you need to submit the following documents to your employer or at the time of filing returns:
| Document | Description |
| Rent Agreement | A signed agreement between you and the landlord |
| Rent Receipts | Monthly or quarterly receipts, usually on landlord’s letterhead |
| PAN of Landlord | Mandatory if annual rent > ₹1,00,000 |
| Proof of Payment | Bank statement or UPI proof, especially if renting from a relative |
| TDS on Rent (Section 194-IB) | Deduct 5% TDS if rent exceeds ₹50,000/month and pay it to the government |
✅ Key Summary Table: HRA in Old vs. New Tax Regime
| Feature | Old Tax Regime | New Tax Regime |
| HRA Exemption | ✅ Available | ❌ Not Available |
| Home Loan Interest Deduction | ✅ Section 24(b) Allowed | ❌ Not Allowed |
| Can Claim Both Together | ✅ Yes | ❌ No |
| Deductions under 80C/80D | ✅ Allowed | ❌ Disallowed (except 80CCD(2)) |
| Best for | Those with exemptions | Those with fewer exemptions |
⚖️ Which Tax Regime Should You Choose?
HRA Exemption in New Tax Regime Your choice between the old and new tax regime depends on your income structure and eligible deductions:
- HRA Exemption in New Tax Regime If you live on rent, pay home loan interest, and invest under 80C – the old regime could offer more tax benefits.
- HRA Exemption in New Tax Regime If you have fewer investments/deductions – the new regime might reduce your tax burden with lower slab rates.
✅ Always use a tax calculator or consult a tax advisor before choosing your regime every year.
📝 Final Words
While the new tax regime offers simplicity and reduced tax rates, it eliminates key tax-saving tools like HRA and home loan deductions. HRA Exemption in New Tax Regime If you are a salaried individual staying in rented accommodation and also servicing a home loan, then the old tax regime may still be more beneficial for you.
Evaluate both options annually, as you are allowed to switch regimes (in case of salaried individuals) every financial year.
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