HRA Exemption Calculation with Examples for FY 2024-25
- Asharam Swain
- Nov 10
- 9 min read
House Rent Allowance (HRA) remains one of the most significant tax-saving components for salaried individuals. For FY 2024-25, the HRA exemption under Section 10(13A) of the Income Tax Act is available only under the old tax regime. It helps employees reduce their taxable income if they live in rented accommodation and meet specific eligibility conditions. With updated ITR reporting requirements and stricter documentation rules, understanding how to calculate and claim HRA exemption accurately has become crucial for taxpayers seeking to optimize their tax benefits.
Table of Contents
What is HRA Exemption under Section 10(13A)?
House Rent Allowance (HRA) exemption is a tax benefit provided under Section 10(13A) of the Income Tax Act, 1961. It allows salaried employees who live in rented accommodation to claim a deduction from their taxable income for the rent they pay. The purpose of this exemption is to reduce the tax burden on employees who do not own a house and need to pay rent. To qualify for this exemption, an employee must receive HRA as part of their salary package and actually pay rent for residential accommodation. The exemption is calculated based on specific criteria, such as the employee’s basic salary, dearness allowance (if applicable), city of residence, and the actual rent paid.
Is HRA Exemption Allowed in the New Tax Regime for FY 2024-25?
Under the new tax regime applicable for FY 2024-25, HRA exemption is not available. The new regime offers lower tax rates but removes most deductions and exemptions, including those under Section 10(13A). As a result, if an employee opts for the new regime under Section 115BAC, the entire HRA received from the employer becomes taxable. However, taxpayers can still choose between the old and new regimes each financial year based on which one offers a better tax outcome. For those who pay rent and want to claim this exemption, the old regime remains the suitable option.
How HRA Works in the Old Tax Regime
In the old tax regime, HRA exemption is calculated as per the rules specified under Section 10(13A) and Rule 2A of the Income Tax Rules. The exemption is available only to salaried individuals who receive HRA from their employer and pay rent for residential accommodation. The calculation depends on three factors—salary structure, rent paid, and city of residence. Metro cities (Delhi, Mumbai, Chennai, and Kolkata) are eligible for a higher exemption limit of 50% of salary, whereas non-metro cities are capped at 40%. This differentiation recognizes the higher rental expenses in major cities. The exempt portion of HRA is determined by comparing three values and choosing the lowest, ensuring that taxpayers receive a fair yet reasonable benefit.
Step-by-Step HRA Exemption Calculation for FY 2024-25
The exempt portion of HRA is the minimum of the following three amounts:
Actual HRA received from the employer during the year.
50% of salary (basic + DA) for metro cities or 40% for non-metro cities.
Rent paid minus 10% of salary (basic + DA).
To calculate HRA exemption accurately, the employee’s salary and rent details should be considered on a monthly basis, especially if there are changes in salary or rent during the year. Only basic salary and dearness allowance are included in the computation, excluding other allowances such as bonuses, commissions, or special pay. The remaining portion of HRA after the exemption is considered taxable and added to the total income.
HRA Exemption Calculation Example for Metro City (Mumbai)
Particulars | Annual Amount (₹) |
Basic Salary | 6,00,000 |
HRA Received | 2,40,000 |
Rent Paid | 2,16,000 |
City | Mumbai (Metro) |
Actual HRA received: ₹2,40,000
50% of salary: 50% of ₹6,00,000 = ₹3,00,000
Rent paid – 10% of salary: ₹2,16,000 - ₹60,000 = ₹1,56,000
The minimum of these three values is ₹1,56,000. Therefore, ₹1,56,000 is exempt, and the balance ₹84,000 (₹2,40,000 - ₹1,56,000) is taxable.
HRA Exemption Calculation Example for Non-Metro City (Jaipur)
Particulars | Annual Amount (₹) |
Basic Salary | 5,00,000 |
HRA Received | 1,50,000 |
Rent Paid | 1,20,000 |
City | Jaipur (Non-Metro) |
Actual HRA received: ₹1,50,000
40% of salary: 40% of ₹5,00,000 = ₹2,00,000
Rent paid – 10% of salary: ₹1,20,000 - ₹50,000 = ₹70,000
The minimum of these three amounts is ₹70,000. Hence, ₹70,000 is exempt, while the remaining ₹80,000 (₹1,50,000 - ₹70,000) is taxable.
Key Points and Compliance Rules for FY 2024-25
HRA exemption is only available under the old tax regime.
Salaried employees must provide rent receipts or a valid rent agreement to their employer.
If annual rent exceeds ₹1,00,000, the landlord’s PAN must be furnished.
HRA exemption must be calculated monthly if salary or rent changes mid-year.
While filing ITR, details such as the amount of HRA received, rent paid, and place of work are now mandatory disclosures.
Taxpayers should ensure all supporting documents are retained for verification during scrutiny or notice assessment.
Documents Required for Claiming HRA Exemption
To claim HRA exemption successfully, employees should maintain the following documents:
Salary slips showing HRA component.
Rent receipts for each month, signed by the landlord.
Rent agreement between tenant and landlord.
Landlord’s PAN card copy, if rent paid exceeds ₹1,00,000 per annum.
Bank statement or payment proof showing rent transfer.
These documents serve as evidence for both employer verification and future tax assessments.
Can HRA and Home Loan Benefits Be Claimed Together?
Yes, both HRA and home loan benefits can be claimed together under specific conditions. If a taxpayer owns a house in one city but lives in rented accommodation in another due to employment, HRA exemption can still be claimed for the rent paid, while the interest on the home loan can be claimed under Section 24(b). However, if the taxpayer lives in their own house and does not pay rent, HRA exemption cannot be availed. The combination of these benefits helps taxpayers manage housing costs efficiently while optimizing tax savings.
Recent CBDT Updates and ITR Disclosure Requirements
The Central Board of Direct Taxes (CBDT) has introduced new reporting requirements for FY 2024-25. Employees claiming HRA exemption under the old tax regime must now disclose details like the total HRA received, rent paid, and the place of employment in their ITR. The employer’s validation process has also been made stricter, requiring accurate submission of rental documents. These changes aim to increase transparency and prevent false claims of HRA exemption. Such updates encourage taxpayers to use automated e-filing platforms that ensure compliance and accurate data entry.
How TaxBuddy Helps Simplify HRA Claim and ITR Filing
TaxBuddy offers an AI-driven platform that automatically calculates HRA exemption based on your salary, city, and rent details. Users can upload documents such as Form 16, rent receipts, and pay slips, and the system identifies the correct exemption value without manual effort. Additionally, TaxBuddy’s expert-assisted plan ensures professional review of your tax filings, minimizing errors and optimizing deductions under the old regime. For salaried individuals, the platform provides a seamless experience by integrating all components—income details, exemptions, and TDS—into one streamlined filing process.
Conclusion
HRA exemption remains an effective way for salaried employees to save tax under the old regime. By understanding the calculation method, maintaining accurate documents, and ensuring correct ITR disclosures, taxpayers can maximize their savings while staying compliant with current laws. For anyone looking for assistance in tax filing, it is highly recommended to downloadTaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy provides flexibility by offering both self-filing and expert-assisted plans for filing income tax returns. The self-filing option allows users to upload essential documents like Form 16, salary slips, and rent receipts, after which the AI engine automatically fills the required fields and checks for errors. For individuals with complex tax situations, such as multiple income sources, capital gains, or HRA calculations, the expert-assisted plan ensures that every entry is reviewed by a qualified tax professional. This dual option helps taxpayers choose a plan that suits their comfort level and complexity of income.
Q2. Which is the best site to file ITR?
The official Income Tax Department e-filing portal is always available for taxpayers, but third-party platforms like TaxBuddy offer a simpler and faster alternative. TaxBuddy combines automation with expert verification, making it ideal for salaried individuals who wish to file their returns accurately and on time. Its AI-driven system auto-calculates exemptions such as HRA, Section 80C deductions, and TDS validation. Moreover, expert support ensures that all tax-saving opportunities are utilized, making TaxBuddy one of the best platforms for a seamless and error-free ITR filing experience.
Q3. Where to file an income tax return?
An income tax return can be filed directly on the government’s e-filing portal (www.incometax.gov.in) or through authorized e-filing platforms such as TaxBuddy. Filing through TaxBuddy simplifies the process by auto-filling data from Form 16 and bank statements, while simultaneously applying relevant exemptions and deductions. The platform also provides real-time validation and ensures compliance with CBDT guidelines. Taxpayers can choose to file returns using either the web interface or the TaxBuddy mobile app for convenience and quick submission.
Q4. Can I claim both HRA and home loan interest deduction together?
Yes, both HRA and home loan interest deductions can be claimed simultaneously if specific conditions are met. This typically applies when a taxpayer owns a property in one city but resides in a rented house in another due to employment or personal reasons. In such cases, the taxpayer can claim HRA for the rent paid and also claim interest on a home loan under Section 24(b) for the owned property. However, if the taxpayer lives in their own house and does not pay rent, HRA exemption cannot be availed. Documentation and proof of both rent payments and home loan interest are essential for claiming these benefits.
Q5. What documents are needed to claim HRA exemption?
To claim HRA exemption, the following documents are required:
Salary slips that clearly show the HRA component.
Rent receipts signed by the landlord, ideally issued monthly.
Rent agreement between the tenant and the landlord.
Landlord’s PAN, if annual rent exceeds ₹1,00,000.
Proof of rent payment, such as bank transfers or UPI payments. These documents must be provided to the employer for TDS calculation and retained for verification during tax filing.
Q6. How does the calculation change if rent or salary varies during the year?
If rent or salary changes during the financial year, HRA exemption should be calculated separately for each period of change. For example, if an employee receives a salary hike mid-year or shifts to a new rental property with different rent, the HRA calculation for each period must be done independently and then summed up for the entire year. This ensures that the exemption reflects accurate figures for both rent and salary. TaxBuddy’s AI-based system automatically handles such variations when you upload your salary slips and rent details, ensuring precise calculation without manual effort.
Q7. Is HRA exemption available for those living with parents? Yes, HRA exemption can be claimed when living with parents, provided the arrangement is genuine. To qualify, the employee must pay rent to the parents and maintain a valid rent agreement. The parents should issue rent receipts and declare the rental income in their income tax return. Bank transactions are preferred over cash payments to establish proof. However, false or undocumented rent payments are not eligible for exemption and may attract scrutiny from the Income Tax Department.
Q8. Can HRA exemption be claimed if I own property in another city? Yes, it is permissible to claim HRA exemption even if the taxpayer owns property in another city, provided they live in a rented house in the city where they work. This situation is common for individuals who own a home in their hometown but rent accommodation closer to their workplace. The rent paid for the current accommodation qualifies for exemption under Section 10(13A), while the owned property can simultaneously generate deductions for interest or principal repayment under Sections 24(b) and 80C, respectively.
Q9. What if my landlord doesn’t have a PAN?
If the annual rent paid exceeds ₹1,00,000, the landlord’s PAN is mandatory for claiming HRA exemption. In cases where the landlord does not possess a PAN, the employee must obtain a written declaration from the landlord stating that they do not have one. This declaration should include the landlord’s name, address, and a copy of valid identity proof such as Aadhaar or voter ID. The employer may still consider the claim if sufficient alternative documentation is provided, though the final decision rests with the assessing authority during scrutiny.
Q10. How does TaxBuddy assist in calculating HRA exemption?
TaxBuddy simplifies HRA calculation through its AI-powered platform that automatically identifies eligibility and computes the exempt amount using your salary and rent details. Once users upload Form 16, salary slips, and rent receipts, the system applies the correct formula—taking into account city classification, rent paid, and salary structure. Additionally, TaxBuddy’s expert review ensures the claim aligns with CBDT rules and recent reporting updates. The entire process eliminates manual errors and provides clarity on how much of your HRA is exempt or taxable.
Q11. What is the deadline for claiming HRA exemption for FY 2024-25?
HRA exemption must be claimed while filing your income tax return for FY 2024-25, the due date for which is generally July 31, 2025, unless extended by the government. However, salaried employees are advised to submit their rent receipts and documents to their employer before the end of the financial year to ensure accurate TDS calculation. Missing this step may lead to excess tax deduction, though the exemption can still be claimed at the time of ITR filing for a refund.
Q12. Is proof of rent mandatory for claiming HRA exemption in ITR? Yes, proof of rent is necessary to support your claim for HRA exemption. While the Income Tax Department does not require rent receipts to be uploaded with the return, they must be available for verification if requested. Employers, however, generally require monthly rent receipts and a rent agreement for granting HRA exemption during salary processing. In the absence of proof, the claim can be denied during assessment. Using platforms like TaxBuddy helps ensure that all necessary documentation is collected and properly reflected in your return, minimizing the risk of disallowance or notice later.
