Question 1

How is HRA exemption calculated?

Accepted Answer

HRA exemption is the minimum of three amounts: (1) Actual HRA received from employer, (2) 50% of basic+DA for metro cities or 40% for non-metro cities, (3) Rent paid minus 10% of basic+DA. The lowest of these three becomes your exempt HRA; the rest is taxable. This ensures fair treatment across different rent situations.

Question 2

Which cities are considered metro for HRA calculation?

Accepted Answer

Only four cities qualify as metro for the 50% HRA exemption: Delhi, Mumbai, Kolkata, and Chennai. All other cities including Bengaluru, Hyderabad, Pune, Ahmedabad etc. are classified as non-metro with 40% exemption rate. This classification is based on historical HRA rules, not current population.

Question 3

Is landlord PAN mandatory for claiming HRA exemption?

Accepted Answer

Yes, if your annual rent exceeds ₹1,00,000 (approximately ₹8,333/month), you must provide landlord's PAN to claim HRA exemption. Without PAN, 20% TDS may apply on rent payment. Even for lower rents, having landlord PAN and rent receipts is advisable for documentation.

Question 4

Can I claim HRA if I own a house and also pay rent?

Accepted Answer

Yes, you can claim HRA even if you own a house, provided: (1) You are actually paying rent for a different residence, (2) The owned property is in a different city or you have a genuine reason for renting. However, you cannot claim both HRA exemption and home loan interest deduction for the same property simultaneously.

Question 5

Is HRA exemption available under the new tax regime?

Accepted Answer

No, HRA exemption is NOT available under the new tax regime. If you opt for new regime, the entire HRA received becomes taxable. This is a significant factor when choosing between old and new regimes, especially for those paying high rents. Calculate both scenarios before deciding.

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