Eligibility to claim HRA Exemption

• The person must be a salaried employee who also receives HRA as part of their salary.
• The person must live in a rented accomodation.
• Self employed individuals or business owners do not qualify for HRA exemption.
• Individuals opting for the new tax regime cannot opt for HRA exemption.
• Rent should be paid to a landlord.
• If the rent amount exceeds Rs. 1,00,000/year, landlord’s PAN is compulsory.
• If HRA is claimed in ITR, salary and rent receipts are necessary.

If an employer does not pay HRA to employee who pays rent towards residential accomodation, the employee can still claim for HRA exemption under the Section 80GG of the Income Tax Act, under certain conditions:

• The person must be salaried or self-employed.
• The person must not have received HRA in the timeframe of the year in which they have claimed 80GG.
• Neither the person nor their spouse own residential accomodation in their current residing.

The New Updates for ITR Filing AY 2025-26(FY 2024-25)

If a person is claiming for HRA under the old tax regime, they are required to provide detailed disclosure in the ITR forms, starting AY 2025-26.

New Schedule for House Rent Allowance has been added, which requires:

• HRA received
• Rent paid to landlord
• Salary (Basic + Dearness Allowance (DA))
• City of Residence (whether metro or non-metro)

Needed documents:

• Details of rent paid
• Salary slip showing HRA break-up

Calculation of HRA Exemption

Explanation of calculation of HRA exemption, along with suitable example:

• Actual HRA received in the year.
• Actual rent paid.
• 50% of salary for metro cities OR 40% of salary for non-metro cities.

Example:

Needhi lives in Delhi (a metro city), in a rented flat, and earns a basic salary of Rs. 40,000/month with DA of Rs. 12,000/month. Calculation of HRA exemption:

Actual HRA received annually = Rs. 16,000 × 12 = Rs. 1,92,000

Rent paid (-) 10% of Salary (Basic + DA): 20,000 × 12 = Rs. 2,40,000 (-) 10% of Rs. 6,24,000 = Rs. 2,40,000 (-) Rs. 62,400 = Rs. 1,77,600

50% of salary (Basic + DA) = 50% of Rs. 6,24,000 = Rs. 3,12,000

HRA Exemption = Rs. 1,77,600

Documents Needed for ITR Filing (Old Regime)

• Salary slip with HRA break-up.
• Rent receipts/rent agreement.
• PAN of landlord, in case of annual rent exceeding Rs. 1,00,000.

HRA Schedule in Income Tax Return Form ( New Requirement for AY 2025-26)

In order to file ITR under the old tax regime, a separate HRA schedule must be filled now, failing in doing so may not allow exemption even if the rent is paid.