Frequently Asked Questions
How is HRA exemption calculated?
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HRA exemption is calculated as the minimum of three amounts: 1) Actual HRA received from employer, 2) 50% of salary (basic + DA) for metro cities or 40% for non-metro cities, 3) Rent paid minus 10% of salary. The calculation considers your basic salary, dearness allowance (if it forms part of retirement benefits), HRA received, and actual rent paid. The lowest of these three amounts is your tax-exempt HRA.
Can I claim HRA if I live in my own house?
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No, you cannot claim HRA exemption if you live in your own house. HRA exemption is only available when you actually pay rent for accommodation. However, you can claim home loan interest deduction under Section 24(b) if you have a housing loan. If you own a house in one city but work and live in a rented accommodation in another city, you can claim both home loan interest and HRA exemption.
Can I pay rent to my parents and claim HRA?
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Yes, you can pay rent to your parents and claim HRA exemption, but you must follow proper procedures: 1) Have a formal rental agreement, 2) Make rent payments through bank transfer (maintain proof), 3) Get rent receipts, 4) Parents must have PAN card if rent exceeds ₹1 lakh per month, 5) Parents must declare this rental income in their ITR. Your parents can reduce this rental income by claiming deductions like property tax, standard deduction (30%), and home loan interest if applicable.
What documents do I need to claim HRA exemption?
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You need the following documents to claim HRA exemption: 1) Rent receipts for the entire financial year, 2) Copy of rental agreement, 3) Landlord's PAN card (mandatory if monthly rent exceeds ₹1 lakh), 4) Proof of rent payment (bank statements/cheque copies), 5) Landlord's name and address details, 6) Declaration in Form 12BB to your employer. Keep these documents safely as they may be required during IT department scrutiny or for filing your income tax return.
Which cities are considered metro for HRA calculation?
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Only four cities are classified as metro cities for HRA exemption purposes: Mumbai, Delhi, Kolkata, and Chennai. If you live in any of these cities, you can claim 50% of salary as HRA exemption. For all other cities in India (including Bangalore, Hyderabad, Pune, Ahmedabad, etc.), only 40% of salary can be claimed as HRA exemption. This classification is as per Income Tax Act Section 10(13A).
Can I claim HRA in new tax regime?
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If you receive HRA from your employer, it is part of your salary structure regardless of which tax regime you choose. However, the exemption treatment differs: In the OLD tax regime, you can claim HRA exemption as per Section 10(13A) rules. In the NEW tax regime (from FY 2023-24), most deductions and exemptions are not available, but HRA exemption is still allowed if you actually receive HRA as part of your salary. Use our calculator to compute your exempt amount.
What if I don't receive HRA from employer?
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If you don't receive HRA from your employer but pay rent, you can claim deduction under Section 80GG (if you meet eligibility criteria): 1) Not receiving HRA from employer, 2) Self-employed, or salaried without HRA, 3) Don't own a house in the city of employment, 4) Maximum deduction: Minimum of (₹5,000/month, 25% of total income, or Rent paid - 10% of total income). This is available in the old tax regime only. File Form 10BA with your ITR to claim this deduction.
How much tax can I save with HRA exemption?
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Tax savings from HRA exemption depend on your tax bracket. If your exempt HRA is ₹1,50,000 per year: At 30% tax bracket (income > ₹15L): Save ₹46,800 (₹1.5L × 30% + 4% cess). At 20% tax bracket (₹10L-15L): Save ₹31,200. At 5% tax bracket (₹3L-7L): Save ₹7,800. Use our calculator to find your exempt amount, then multiply by your tax rate to calculate actual savings. Remember to factor in the 4% health & education cess on top of income tax.
Can I claim both HRA and home loan deduction?
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Yes, you can claim both HRA exemption and home loan interest deduction, but NOT for the same property. Common scenarios: 1) You own a house in City A and work/live in rented accommodation in City B - claim both, 2) You own a house but rent it out and live in another rented house - claim both, 3) You own one house and have a loan on another under-construction property - claim both. However, if you live in your own house with a home loan, you can only claim home loan deduction (Section 24), not HRA.
What happens if I receive HRA but don't pay rent?
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If you receive HRA from your employer but don't actually pay rent (living in own house, with parents without paying rent, or company-provided accommodation), the entire HRA amount becomes fully taxable. You cannot claim any exemption under Section 10(13A). The HRA will be added to your taxable income and you'll pay tax on it according to your applicable tax slab. If you've been claiming exemption incorrectly, it can lead to tax demands and penalties during IT department scrutiny. Always ensure you have genuine rent payments with proper documentation.
