How to Claim HRA in ITR Under the New Tax Regime?
House Rent Allowance (HRA) is a key component of a salaried individual's salary structure, providing tax relief on rent payments under the old tax regime. However, with the introduction of the new tax regime, many exemptions and deductions, including HRA, have been removed. This has raised concerns among taxpayers about how to claim HRA in their Income Tax Return (ITR) under the new tax regime.
This article will highlight the latest tax rules, eligibility, and the step-by-step process of filing ITR with HRA considerations under the new tax regime for FY 2024-25.
Table of Contents
Understanding HRA Under the New Tax Regime
Under the new tax regime introduced in FY 2020-21, the government has removed nearly all exemptions and deductions that were available under the old regime. HRA exemption is not available under the new tax regime. This means that if you opt for the new tax regime, your entire HRA component will be added to your taxable income and taxed according to the applicable slab rates.
Key Changes in HRA Treatment:
Under the old tax regime, HRA exemption was available under Section 10(13A) of the Income Tax Act.
The new tax regime does not allow HRA exemption, making it fully taxable.
Salaried individuals opting for the new regime cannot claim deductions under Section 80C, 80D, 24(b), or HRA exemptions.
However, self-employed individuals or those not receiving HRA can still claim a rent deduction under Section 80GG, subject to specific conditions.
Can You Claim HRA in ITR Under the New Tax Regime?
No, if you opt for the new tax regime, you cannot claim HRA exemption while filing ITR. However, if you are filing under the old tax regime, you can continue to claim HRA benefits, provided you meet the eligibility criteria.
If you are not receiving HRA but paying rent, you may be eligible to claim a deduction under Section 80GG (applicable under both regimes), which allows rent deductions for those who do not receive HRA but live in rented accommodation.
Step-by-Step Process to Claim HRA in ITR Under the New Tax Regime
Since HRA is not exempt under the new tax regime, it is important to report it correctly in your ITR. Follow these steps while filing your return:
Under the New Tax Regime
Step 1: Choose the Right Tax Regime
While filing your ITR, you will be asked to choose between the old and new tax regimes.
If you select the new tax regime, you cannot claim HRA exemption.
If you want to claim HRA, you must opt for the old tax regime while filing your return.
Step 2: Gather Salary Details
Obtain your Form 16 from your employer, which includes a breakup of your salary components, including HRA.
If you receive HRA as part of your salary, it will be included in the taxable salary section under the new tax regime.
Step 3: Report HRA in ITR
Under the new tax regime, HRA is fully taxable.
While filling out the income details section in ITR, report your gross salary, including HRA, as taxable income.
Step 4: Verify Tax Deducted at Source (TDS)
Step 5: Submit ITR
After completing all income and tax details, proceed with submission.
Review your tax liability under the new tax regime before finalizing the return.
Submit the ITR and verify it using Aadhaar OTP, net banking, or DSC.
Under the Old Tax Regime
If you choose the old tax regime, you can claim HRA exemption by following these steps:
Step 1: Collect Necessary Documents
Keep rent receipts, rental agreements, and landlord’s PAN details (if rent exceeds ₹1 lakh annually).
Obtain Form 16 from your employer to check the HRA component of your salary.
Step 2: Calculate HRA Exemption
The HRA exemption is the minimum of the following:
Actual HRA received.
50% of basic salary (metro cities) or 40% of basic salary (non-metro cities).
Rent paid minus 10% of basic salary.
Step 3: Report HRA in ITR
When filling out your ITR, enter the exempted HRA amount under the ‘Exempt Allowances’ section.
The remaining salary after HRA exemption will be subject to taxation as per the old tax regime.
Step 4: Verify Tax Deducted at Source (TDS)
Cross-check Form 16 and Form 26AS to ensure accurate TDS deductions.
Any discrepancies should be corrected before filing the return.
Step 5: Submit ITR and Claim Refund (if applicable)
If excess TDS has been deducted due to incorrect HRA exemption calculations, you may be eligible for a tax refund.
Submit your ITR and verify it using Aadhaar OTP, net banking, or D
Alternative: Claiming Rent Deduction Under Section 80GG
If you do not receive HRA but still pay rent, you may be eligible for a deduction under Section 80GG, even under the new tax regime. The conditions are:
You are not receiving HRA from your employer.
You live in rented accommodation and pay rent.
Your total income is below ₹10 lakh per annum.
The maximum deduction allowed is ₹5,000 per month or 25% of total income, whichever is lower.
Conclusion
Under the new tax regime, HRA exemption is not available, and any HRA received will be fully taxable. However, taxpayers who do not receive HRA but pay rent can explore Section 80GG for rent deductions. Before choosing between the old and new tax regimes, it is advisable to compare tax liabilities and opt for the one that provides the most tax savings.
FAQs
1. Can I claim HRA while filing ITR under the new tax regime?
No, HRA exemption is not allowed under the new tax regime. Your entire HRA component will be included in taxable salary and taxed as per applicable slab rates.
2. Can I switch between the old and new tax regimes?
Yes, salaried individuals can switch between the old and new tax regimes every financial year while filing ITR. However, those with business income cannot switch back once they opt for the new regime.
3. Is there any alternative way to claim rent deduction under the new tax regime?
Yes, individuals not receiving HRA but paying rent can claim a deduction under Section 80GG, subject to specific conditions.
4. What happens if I mistakenly claim HRA exemption under the new tax regime?
If you mistakenly claim HRA under the new tax regime, your ITR may be flagged for correction, and you might need to pay additional taxes with interest.
5. Is there any benefit of opting for the new tax regime if I have HRA?
The new tax regime offers lower tax rates, but removes exemptions like HRA. If your total deductions are significant, the old tax regime may be more beneficial.
6. How do I check if my employer has deducted TDS on HRA correctly?
You can verify your Form 16 and Form 26AS to check if TDS deductions match your salary structure.
7. Does the new tax regime provide any alternative tax benefits for salaried employees?
The new tax regime offers a higher standard deduction of ₹75,000, but removes most exemptions, including HRA and LTA.
8. Can self-employed individuals claim any rent deductions?
Yes, self-employed individuals can claim rent deductions under Section 80GG, but with conditions.
9. Should I opt for the new tax regime if I receive HRA?
It depends on your total deductions. If your HRA exemption and other deductions significantly reduce taxable income, the old tax regime might be better.
10. What is the penalty for not declaring HRA properly under the new tax regime?
If HRA is not declared correctly, it could lead to tax notices or additional tax liabilities.
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