ITR HRA: A significant component of salaries is the House Rent Allowance (HRA). This allowance is provided by companies to assist employees in covering their rental expenses. Additionally, it plays a crucial role in reducing taxable income. While it was beneficial under the old tax system, does it still offer advantages in the new regime? Are there exemptions available for both HRA and home loans? This article aims to address all your queries related to HRA.

No, the new tax regime does not provide any exemptions for HRA. In fact, several other income tax exemptions are also unavailable under this system, including:

• Leave Travel Concession


• Special allowances (such as for children's education, hostel fees, uniforms, etc.)


• Interest on home loans (Section 24b)


• Benefits from family pensions


• Most exemptions under sections 80C and 80D (except for 80CCD(2))

Yes, under the old tax system, individuals can benefit from both HRA exemptions and deductions on home loan interest. This scenario typically arises when a person resides in a rented accommodation in one city while owning a home elsewhere for which they are repaying a loan. Sometimes, family members may occupy that home. If you have valid reasons and documentation, you can claim both exemptions. For instance, if you rent out your own home and live in a rented place near your workplace, you can still avail both tax benefits, but you must report the rental income in your tax return.

In the old tax regime, the calculation for HRA exemption follows a specific formula. The exemption is the lowest of the following three amounts:

• The HRA received from the employer


• 50% of salary if residing in a metro city, otherwise 40%


• Rent paid in a year minus 10% of salary

Here, 'salary' refers only to the basic salary. If you receive a Dearness Allowance (DA) that is part of your retirement benefits, it should also be included.

To claim the exemption, you will need the following documents:

• Rent agreement


• Rent receipts


• Landlord's PAN (if annual rent exceeds ₹1 lakh)


• Proof of rent payment (especially if paying rent to a relative)


• If rent exceeds ₹50,000 per month, TDS deduction proof is also required