Introduction — The Confusion Every Salaried Employee Faces
A lot of salaried people discovered the New Tax Regime because it promised “lower tax rates and no complications.”
But the moment rent comes into the picture, one big question pops up:
“Can I still claim HRA exemption if I choose the new regime?”
The short answer is No.
Under the New Tax Regime, the HRA exemption is not allowed. The benefit under Section 10(13A) applies only if you choose the Old Tax Regime. And this tiny decision often changes how much tax you actually save.
Official reference:
👉 https://www.incometax.gov.in/iec/foportal/help/individual/know-your-tax-regime
Let’s break it down in plain English — no jargon, no textbook talk — just practical clarity.
What Is HRA and Why Does It Matter?
House Rent Allowance (HRA) is a salary component employers pay to help employees cover rent — especially useful if you live in a metro or high-rent city.
Under the Old Tax Regime, HRA exemption is Allowed (subject to conditions) such as:
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You must be living in rented accommodation
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You should actually be paying rent
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HRA must be part of your salary
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You must submit rent proofs when required
HRA rules reference:
👉 https://www.incometaxindia.gov.in/tutorials/Pages/taxation-of-salaries-hra.aspx
When these criteria are met, part of your HRA becomes tax-free — meaning lower taxable income and more savings.
But everything changes once you move to the New Tax Regime.
HRA in the New Tax Regime — What the Law Actually Says
HRA Exemption: Allowed or Not Allowed?
Under the New Tax Regime, most exemptions and deductions were removed to simplify filing. That includes:
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HRA Exemption — Not Allowed
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Section 80C — Not Allowed
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LTA — Not Allowed
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Standard Deduction — (later re-introduced with limits)
More on regime features:
👉 https://www.incometax.gov.in/iec/foportal/help/individual/section-115bac
So even if you:
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live in a rented house
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pay rent every month
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receive HRA in your salary slip
…you cannot claim HRA exemption in the New Tax Regime.
In simple words:
HRA exemption is not available for salaried individuals who opt for the New Tax Regime.
If you want to claim it, you must switch to the Old Tax Regime (if eligible).
Old Tax Regime vs New Tax Regime — Which One Makes Sense for HRA?
Let’s look at a practical scenario.
Riya earns ₹10,00,000 a year and pays ₹20,000 monthly rent.
Under the Old Regime, she can claim:
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HRA exemption
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80C deductions
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Other eligible benefits
Under the New Regime:
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lower slab rates
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no HRA exemption
You can compare both regimes using the IT portal calculator:
👉 https://www.incometax.gov.in/iec/foportal/tax-calculator
In many cases, people paying high rent save more under the Old Regime — because HRA reduces taxable income.
This decision is not emotional — it is math + personal situation.
Understanding the Criteria for HRA Exemption (Old Regime Only)
HRA exemption depends on the lowest of these values:
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Actual HRA received
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50% of salary (metro) / 40% (non-metro)
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Rent paid minus 10% of salary
Detailed computation method:
👉 https://www.incometaxindia.gov.in/charts%20tables/hra-calculation.htm
Real-life takeaway:
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Low rent = low exemption
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High salary + moderate rent = partial benefit
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Paying rent to parents may qualify if documented legally
But again — this applies only under the Old Regime.
Common Mistakes People Make About HRA
Mistake 1 — Assuming HRA applies automatically
It doesn’t. It depends on:
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tax regime selection
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rent proof
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compliance rules
Mistake 2 — Switching to New Regime without comparing
Mistake 3 — Not calculating before filing
Return-filing help centre:
👉 https://www.incometax.gov.in/iec/foportal/help
A quick comparison can save thousands in tax.
When Should You Prefer the New Tax Regime?
The New Regime works better for people who:
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don’t pay rent
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don’t invest much
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prefer lower rates with no paperwork
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have fewer deductions
When Should You Stick to the Old Tax Regime?
You should consider the Old Regime if you:
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live in rented accommodation
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invest under Section 80C
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pay insurance / NPS / housing EMI deductions
NPS reference:
👉 https://www.npscra.nsdl.co.in
Here, HRA + deductions often beat lower slab rates.
How to Decide Which Regime Is Right for You (Practical Steps)
Step 1 — List your annual deductions
Include:
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HRA Exemption
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80C investments
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80D health insurance
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NPS
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Home loan interest
Step 2 — Calculate tax under both regimes
Use:
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company payroll tool
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income-tax calculator
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CA / planner support
Step 3 — Choose the one with lower payable tax
You can re-evaluate every year (for salaried employees).
Pro Tips to Avoid Losing HRA Benefits
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Don’t switch blindly because “it sounds simpler”
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If you pay high rent — compare first
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Keep rent receipts, lease agreement & payment proofs
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Document rent paid to parents properly
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Re-evaluate annually — income & rent change over time
Good tax planning = informed decisions, not shortcuts.
Final Verdict — Can You Claim HRA in the New Tax Regime?
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HRA Exemption is NOT Allowed under the New Tax Regime
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It is Allowed (subject to conditions) only in the Old Tax Regime
If rent is a major expense — compare both regimes before deciding.
Smart tax planning isn’t about memorising rules — it’s about understanding how they affect your real-life money.
Call to Action
Unsure which regime benefits you more?
Share your salary, rent, and deductions — and I’ll help you compare both options so you don’t end up paying extra tax unnecessarily.
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