HRA Exemption

The exempt HRA under Section 10(13A) is the least of three: actual HRA received, rent paid minus 10% of basic + DA, or 50% of basic + DA for metro cities (40% for non-metros). Take a Bangalore example: basic Rs 60,000 per month, HRA Rs 24,000, rent Rs 22,000. Computations: actual HRA Rs 2,88,000; rent minus 10% basic = (22,000 × 12) − (60,000 × 12 × 10%) = 2,64,000 − 72,000 = Rs 1,92,000; 40% of basic = Rs 2,88,000. Lowest is Rs 1,92,000, which is your exemption. Rs 96,000 of HRA becomes taxable. Save rent receipts and the landlord PAN if rent exceeds Rs 1 lakh annually.

No. The very basis of HRA exemption under Section 10(13A) is that you actually pay rent to occupy a residence. If you live in a house you own, no rent is paid, the exemption is zero, and the entire HRA in your salary is taxable. There's a separate workaround some try: declaring rent paid to a spouse or parent who owns the house. That's allowed only if it's a genuine arrangement with rent actually transferred and the recipient declares the income in their ITR. Sham arrangements get rejected during scrutiny, with penalty. If you have a home loan instead, claim Section 24(b) and 80C for principal.

For HRA computation, only four cities are classified as metros for the Section 10(13A) rule: Delhi, Mumbai, Kolkata and Chennai. Residents of these get 50% of basic + DA in the third leg of the HRA formula. Every other city, including Bengaluru, Hyderabad, Pune, Gurgaon and Noida, is treated as non-metro with a 40% cap. This often surprises Bengaluru and Hyderabad employees. The classification is based on where you actually rent and live, not where your employer's office is. So if you work in Mumbai but live in Thane, the metro 50% still applies because Thane falls within the broader Mumbai region.

Yes, this is permitted, but it must be a genuine arrangement, not a paper transaction. Conditions: the property must be owned by your parent (not jointly with you), rent should be paid through bank transfer with a clear monthly trail, a written rent agreement should exist, rent should be at fair market level for the locality, and your parent must declare the rent as house property income in their ITR. If your parent is in a lower tax slab or below the basic exemption, the family saves overall tax legitimately. Tax authorities scrutinise these closely, so don't try this with a sham agreement. PAN of parent is required if annual rent exceeds Rs 1 lakh.

Yes. To claim HRA exemption through your employer (so that TDS is calculated on the post-exemption salary), you must submit Form 12BB along with rent receipts for the financial year. If annual rent exceeds Rs 1 lakh, you also need to provide the landlord's PAN. Without PAN, the employer cannot allow the exemption beyond Rs 1 lakh. Receipts should show landlord name, address, monthly amount, period and signature, with revenue stamp affixed for amounts above Rs 5,000 per receipt as per Indian Stamp Act in many states. Even if you missed declaring at the employer, you can claim it directly while filing your ITR.

Under the new tax regime (Section 115BAC), HRA exemption under Section 10(13A) is fully unavailable. The entire HRA in your salary becomes taxable. This is one of the biggest sacrifices for new-regime opters who pay substantial rent. For example, a Mumbai professional earning Rs 18 lakh CTC with Rs 4 lakh HRA and rent of Rs 35,000 per month would lose roughly Rs 3 lakh of HRA exemption by switching, easily worth Rs 60,000-90,000 in tax. So always run both regimes before opting; the new regime's lower slabs sometimes don't fully compensate for HRA loss in high-rent metros.

Yes, in many real-world situations both can be claimed simultaneously under the old regime. Common scenarios: you own a house in your hometown that's let-out or vacant, but you live in a rented place in the city where you work; you own a house in a different city where your family stays while you rent in your work city; or your owned house is under construction. In each case, HRA on the rent paid where you live and Section 24(b) on home loan interest for the owned house both apply. Just ensure documentation is clean. Tax officers do check addresses and timelines during scrutiny.