Can I Claim HRA in New Tax Regime in India for FY 2024-25? HRA Eligibility in New Regime
- Rajesh Kumar Kar
- Feb 19
- 9 min read
Updated: Apr 9
With the introduction of the new tax regime in India, many salaried individuals are questioning whether they can still claim House Rent Allowance (HRA) to reduce their taxable income. If you are living in a rented home and receiving HRA, it is essential to understand how the new tax regime affects HRA eligibility. The changes in tax laws and exemptions can significantly impact your tax liabilities, and understanding these changes is crucial for effective tax planning.
Table of Contents
What Is the New Tax Regime?
The new tax regime, introduced by the Finance Minister in the 2020 Budget, aims to simplify the tax structure by offering lower tax rates. However, the trade-off for these lower tax rates is the removal of most exemptions and deductions, including HRA.
Here's a quick look at the tax slabs under the new regime for FY 2024-25:
Annual Income (₹) | Tax Rate |
Up to ₹4,00,000 | Nil |
₹4,00,001 to ₹8,00,000 | 5% |
₹8,00,001 to ₹12,00,000 | 10% |
₹12,00,001 to ₹16,00,000 | 15% |
₹16,00,001 to ₹20,00,000 | 20% |
₹20,00,001 to ₹24,00,000 | 25% |
Above ₹24,00,000 | 30% |
While the lower tax rates are appealing, salaried individuals who rely on deductions like HRA might not benefit as much from the new regime. This is because, under the new tax regime, HRA exemptions are not available.
Can I Claim HRA in the New Tax Regime?
The simple answer is no. If you opt for the new tax regime, you cannot claim HRA exemption. This means that HRA will be fully taxable in your income, and you won’t be able to use it as a tax-saving tool.
HRA Eligibility in New Tax Regime: Why Is HRA Not Available in the New Tax Regime?
The new tax regime simplifies the tax calculation process by offering lower tax rates but at the cost of removing most exemptions and deductions. This includes HRA, LTA, 80C deductions, and others. These deductions and exemptions were available under the old tax regime to reduce taxable income, but with the new regime, the government has removed them in favor of simplified filing and lower rates.
HRA Exemption in the Old Tax Regime
If you prefer to stick with the old tax regime, you can still claim HRA exemption to reduce your taxable income. Here’s how HRA works under the old tax regime:
Eligibility Criteria for Claiming HRA
To claim HRA exemptions under the old tax regime, you must fulfill the following criteria:
You must be a salaried employee who receives HRA as part of your salary.
You must live in a rented house (not self-owned).
Rent receipts must be provided as proof of payment.
If your annual rent exceeds ₹1 lakh, you need to submit your landlord’s PAN.
The rent paid must exceed 10% of your basic salary to qualify for HRA exemptions.
You need a valid rental agreement if requested by the employer or for audit purposes.
How is HRA Exemption Calculated?
The HRA exemption is calculated based on the minimum of the following three amounts:
Actual HRA received from your employer.
50% of basic salary (for metro cities) or 40% for non-metro cities.
Rent paid minus 10% of basic salary.
Example of HRA Exemption Calculation
Let’s use the following example to understand the HRA exemption calculation:
Ankit, a salaried employee in Mumbai, receives the following:
Particulars | Amount (₹) |
Basic Salary | ₹50,000 per month |
HRA Received | ₹20,000 per month |
Rent Paid | ₹18,000 per month |
City of Residence | Mumbai (Metro) |
HRA Exemption Calculation:
Actual HRA Received: ₹20,000
50% of Basic Salary: ₹25,000
Rent Paid – 10% of Basic Salary: ₹18,000 – ₹5,000 = ₹13,000
The minimum value among these three is ₹13,000 per month (₹1,56,000 annually), which means Ankit can claim ₹1,56,000 as HRA exemption under the old tax regime.
How to Claim HRA in the Old Tax Regime
To claim HRA exemptions under the old tax regime, follow these steps:
1. Declare HRA to Your Employer
At the beginning of the financial year, declare your rent details to your employer. This ensures that your HRA exemption is included in Form 16.
2. File Your Income Tax Return (ITR)
If you missed declaring your HRA earlier, you can manually enter the exempt amount in your Income Tax Return (ITR). Most tax portals have automated calculators that help you claim these deductions efficiently.
3. Keep Documents for Scrutiny
For future verification or audit, keep the following documents ready:
Rent receipts signed by the landlord
Rental agreement
Bank statements showing rent payments
Form 12BB for investment declaration
Landlord’s PAN (if rent exceeds ₹1 lakh annually)
Tax Implications: Which Regime Should You Choose?
Now that we’ve explained the HRA eligibility and its impact under both regimes, let’s discuss which regime might be the right fit for you.
Choose the Old Tax Regime if:
You receive significant HRA and rely on it to reduce your taxable income.
You have other exemptions such as 80C, 80D, home loan interest, etc.
Your salary is high and the HRA exemptions are substantial enough to lower your tax liability.
Choose the New Tax Regime if:
You don’t have many exemptions or deductions.
You prefer lower tax rates and a simplified filing process.
You are comfortable foregoing tax-saving tools like HRA, LTA, and deductions under 80C, in exchange for simpler tax filing.
Conclusion
In conclusion, HRA exemptions are not available under the new tax regime, which means you will need to assess whether the lower tax rates outweigh the loss of deductions like HRA. If you depend on HRA for tax savings, the old tax regime is the better option for you. However, if you prefer a simpler and more straightforward tax filing process with lower rates, the new tax regime may be more beneficial, provided you don’t need to claim exemptions like HRA. Make sure to reassess your tax situation every year, especially if your income and expenses change.
Frequently Asked Questions (FAQs)
Q1. Can I claim HRA in the new tax regime?
No, you cannot claim HRA exemption if you choose the new tax regime. The new tax regime, while offering lower tax rates, eliminates several deductions and exemptions, including HRA. As a result, you must pay tax on the entire HRA amount that is received as part of your salary. This can be a disadvantage for individuals who rely on HRA to reduce their taxable income. The new regime simplifies the tax process but at the cost of tax-saving tools like HRA.
Example: If your salary is ₹10,00,000 and you receive ₹2,00,000 as HRA, under the new tax regime, you will be taxed on the entire ₹2,00,000.
Q2. How does the loss of HRA exemption impact my taxes?
The loss of the HRA exemption means that your taxable income increases by the amount of HRA you were previously claiming as an exemption. This leads to a higher tax liability, especially if you were using the HRA exemption to significantly reduce your taxable income in the past.
Example: Let’s say you received ₹1,50,000 as HRA exemption under the old tax regime. By switching to the new regime, you lose that exemption, and your taxable income increases by ₹1,50,000. This results in a higher tax bill, depending on your tax bracket.
Impact: For individuals with high HRA, the increase in taxable income could lead to a significant rise in tax payments, which is one of the major disadvantages of switching to the new regime if you rely on HRA exemptions.
Q3. Can I still receive HRA in my salary under the new tax regime?
Yes, you will continue to receive HRA as part of your salary under the new tax regime, but it will be fully taxable. Even though the new tax regime eliminates HRA exemptions, the employer will continue to provide HRA in your salary structure. The difference is that you will have to pay tax on the entire amount of HRA, without being able to reduce it by claiming an exemption.
Example: If you receive ₹20,000 per month as HRA, it will be added to your income and taxed as part of your total income.
Q4. Is it better to stick with the old tax regime or opt for the new one?
Deciding between the old tax regime and the new tax regime depends on your specific tax situation. If you have significant exemptions and deductions like HRA, 80C deductions (for PPF, ELSS, etc.), 80D (medical insurance), and others, the old tax regime might be more beneficial for you as it allows you to reduce your taxable income through these deductions.
On the other hand, if you don’t have many exemptions or if you prefer a simpler and quicker tax filing process, the new tax regime may be better. It comes with lower tax rates but no exemptions.
Tip: To determine the best option, calculate your taxable income and deductions under both regimes. An online tax calculator can help you compare the tax liabilities under both regimes.
Q5. How do I calculate my tax liability under both regimes?
To calculate your tax liability under both the old and new tax regimes, you need to:
Old Tax Regime: Add up all exemptions and deductions (like HRA, 80C, 80D, etc.) to your gross income and subtract them from your total salary to arrive at your net taxable income. Then, apply the old tax slabs to calculate the tax liability.
New Tax Regime: Here, you will apply the new tax rates directly to your total salary income without any exemptions or deductions (like HRA, 80C).
Example: Suppose your salary is ₹10,00,000, and you claim ₹1,00,000 in HRA under the old tax regime. Your taxable income under the old regime would be ₹9,00,000, while under the new tax regime, it remains ₹10,00,000.
You can use an online tax calculator to automatically calculate the difference in tax liabilities.
Q6. Can I claim both HRA and LTA in the new tax regime?
No, you cannot claim exemptions for either HRA or LTA under the new tax regime. The new regime eliminates both of these popular exemptions, which means that even if you receive LTA (Leave Travel Allowance) as part of your salary, it will be fully taxable along with your other income.
Example: If you receive ₹20,000 per year as LTA and ₹2,00,000 as HRA, under the new tax regime, both amounts will be taxable in full.
Q7. Can I claim HRA if I stay with my parents?
Yes, you can claim HRA if you pay rent to your parents, provided you fulfill the eligibility criteria. You must have a rental agreement with your parents, and you should be able to prove rent payments through bank transfers or receipts. Additionally, your parents must report the rent income in their Income Tax Return (ITR).
Example: If you pay ₹10,000 per month as rent to your parents, you can claim HRA as long as you have a rental agreement, proof of payment, and your parents declare the income.
Q8. What documents are required for claiming HRA?
To claim HRA, you need to provide the following documents:
Rent Receipts: Signed by the landlord and detailing the amount of rent paid.
Rental Agreement: In case your employer asks for it.
Bank Statements: Showing rent payments.
Form 12BB: For declaring tax-saving investments.
Landlord’s PAN: If your annual rent exceeds ₹1 lakh.
These documents are necessary to prove that you live in a rented property and are eligible to claim HRA.
Q9. Is there a limit on the amount of rent I can claim for HRA?
There is no upper limit on the amount of rent you can claim for HRA. However, the claim must be reasonable and should correspond to your salary and the rent you are actually paying. The exemption is subject to the three conditions mentioned earlier: the amount received, the percentage of basic salary, and the rent paid minus 10% of basic salary.
Example: If your rent is higher than what would reasonably be expected based on your salary, your employer or the tax authorities may ask for proof and reasonableness.
Q10. Can I switch between the old and new tax regimes each year?
Yes, salaried individuals can switch between the old and new tax regimes each financial year. However, if you are a self-employed individual or have business income, you can switch only once. This provides flexibility in choosing the tax regime that works best for you each year.
Example: If you find that in one year, your exemptions like HRA significantly reduce your taxable income, you may choose the old regime for that year. In the next year, if your exemptions are lower, you can opt for the new regime.
Q11. What happens if my landlord doesn’t have a PAN?
If your annual rent exceeds ₹1 lakh, you must provide your landlord’s PAN. However, if your landlord does not have a PAN, you can submit a signed declaration from the landlord, acknowledging the rent paid. This is important for tax purposes, as the government needs to track rental income above ₹1 lakh.
Q12. Can NRIs claim HRA exemption?
Yes, Non-Resident Indians (NRIs) can claim HRA exemption under the old tax regime, provided they meet the same eligibility criteria, i.e., they are earning salary income in India and living in a rented accommodation. NRIs are also required to submit rent receipts and other supporting documents, just like resident individuals.
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