With the rollout of the new income tax regime under Section 115BAC, salaried individuals are facing a crucial choice—should they stick with the old system or switch to the new one? One major deciding factor is the House Rent Allowance (HRA). Under the new tax regime, HRA exemptions are no longer available, which has created confusion among many taxpayers.

Here’s a breakdown of what changes under the new rules, how HRA is calculated in the old regime, and whether HRA and home loan benefits can be claimed together.

HRA in New Tax Regime: What Has Changed?

Under the new tax regime, you cannot claim exemption on HRA (House Rent Allowance). Section 115BAC, which governs the new structure, removes several popular tax deductions and exemptions, including:

• HRA exemption

• Leave Travel Concession (LTC)

• Deduction on housing loan interest (Section 24b)

• Children’s education allowance

• Section 80C deductions (like investments in LIC, PPF, ELSS, etc.)

In short, the new regime offers lower tax rates but eliminates most deductions. If you rely on HRA to save taxes, this change could significantly impact your annual liability.

Can You Claim Both HRA and Home Loan Benefits?

Yes, but only under the old tax regime.

If you're living in a rented house due to your job location, and you also have a home loan running for a separate self-owned house (perhaps in another city or suburb), you can claim tax benefits on both HRA and home loan interest.

However, this is allowed only if:

• You are not living in the house on which you’ve taken a loan.

• The house is either rented out or occupied by family members.

You’ll need to provide adequate proof to the tax department regarding both your rental residence and the loan property usage.

How Is HRA Exemption Calculated in the Old Regime?

Under the old tax regime, HRA exemption is calculated on the lowest of the following three components:

1. Actual HRA received from employer

2. 50% of basic salary (for metro cities) or 40% (for non-metros)

3. Rent paid minus 10% of basic salary

Example:

Suppose:

• Basic annual salary = ₹8,00,000

• Actual HRA received = ₹3,20,000

• Rent paid = ₹3,60,000 per year (₹30,000/month)

• City = Metro (like Delhi or Mumbai)

Now, calculate exemption:

1. HRA received = ₹3,20,000

2. 50% of basic salary = ₹4,00,000

3. Rent paid – 10% of salary = ₹3,60,000 – ₹80,000 = ₹2,80,000

So, HRA exemption allowed = ₹2,80,000 (least of the three)

You can claim this exemption only under the old regime, provided you submit rent receipts, landlord details, and sometimes PAN of the landlord (especially if rent exceeds ₹1,00,000 annually).

Choosing Between Old vs. New Tax Regime: What Should You Do?

If you have:

• HRA benefits

• Home loan interest payments

• Investments under Section 80C (LIC, EPF, PPF, etc.)

• Education fees or other deductions

Then the old regime might offer better tax savings.

But if your income structure is simple, and you do not claim many deductions, the new regime may reduce your overall tax rate.

Final Words

The new tax regime may seem attractive due to its simplified slabs and lower rates, but for salaried individuals who rely on HRA and deductions to reduce taxes, it could lead to higher outgo. Carefully calculate your taxable income under both systems before deciding.

If you're renting and also repaying a home loan, staying with the old regime could help maximize your savings. Choose wisely based on your income profile, proof availability, and long-term financial goals.