HRA

HRA is one of the most common, and most misclaimed, tax breaks for salaried Indians. If you draw a salary and pay rent, part of your House Rent Allowance can escape income tax under Section 10(13A).

How the exemption is calculated

The exempt amount is the lowest of three figures: the actual HRA your employer pays; 50% of basic salary if you live in a metro (Delhi, Mumbai, Kolkata, Chennai) or 40% for non-metros; and rent paid minus 10% of basic salary. Because it is the minimum of three, your exemption is usually capped well below the full HRA you receive. It is also computed month by month, so a mid-year move or a salary change is handled period by period.

The big catch: tax regime

HRA exemption is available only under the old tax regime. If you opt for the default new regime, with its lower slab rates, the entire HRA becomes fully taxable. So claiming HRA is part of a larger old-vs-new comparison, not a standalone decision.

In India: documentation

You need genuine rent receipts, and if annual rent crosses ₹1 lakh, your landlord's PAN. Paying rent to a parent is allowed if it is real, money actually transferred and ideally declared as income by the parent, but the tax department scrutinises sham arrangements closely. You can claim HRA and a home-loan deduction together in valid cases, for instance if you rent in one city and own a home elsewhere.

Common mistakes

Many employees overstate exemption, assume the whole HRA is tax-free, or forget that no HRA component in the salary means no Section 10(13A) claim (self-employed and those without HRA use the separate Section 80GG instead). Keep receipts, an actual rent trail and a written agreement. With tighter reporting and AIS data-matching, fabricated rent claims are increasingly easy for the department to flag.