Question 1

How is HRA exemption calculated?

Accepted Answer

HRA exemption is the minimum of three amounts: (1) Actual HRA received from your employer, (2) 50% of basic salary if you live in a metro city (Mumbai, Delhi, Kolkata, Chennai) or 40% for non-metro cities, (3) Rent paid minus 10% of basic salary. The lowest of these three is the exempt amount.

Question 2

Which cities are considered metro for HRA purposes?

Accepted Answer

For the purpose of HRA exemption under the Income Tax Act, only four cities are classified as metro: Mumbai, Delhi, Kolkata, and Chennai. All other cities, including Bangalore, Hyderabad, Pune, and Ahmedabad, are treated as non-metro and get 40% instead of 50%.

Question 3

Can I claim HRA if I live in my own house?

Accepted Answer

No, you cannot claim HRA exemption if you live in your own house. HRA exemption is available only if you are paying rent for accommodation. However, you can claim HRA if you own a house in one city but pay rent in another city where you work.

Question 4

Do I need rent receipts to claim HRA?

Accepted Answer

If your annual rent exceeds Rs 1 lakh, you must provide your landlord's PAN to claim HRA exemption. Rent receipts are generally required for rent above Rs 3,000 per month. It is advisable to keep rent receipts, rental agreement, and bank transfer proofs for all rent payments.

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 the new tax regime, you cannot claim HRA exemption. This is one of the key deductions that makes the old regime beneficial for those paying significant rent in metro cities.

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