Let’s have a real talk about House Rent Allowance (HRA) and how you can actually save on taxes—especially with all the changes that Budget 2025 has thrown our way. If you’re a salaried professional living in a rented place, this is for you. No jargon, no robot-speak—just the stuff you need to know, explained like a friend would over coffee.

What’s HRA, Anyway?

Think of HRA as your employer’s way of helping you with rent. It’s a chunk of your salary meant to ease the pain of monthly rent payments. The best part? If you play your cards right, a good portion of this allowance can be tax-free, which means more money stays in your pocket.

Old vs. New Tax Regime: Which Side Are You On?

Here’s where things get interesting (and a bit tricky). With Budget 2025, the government made it super clear: if you want to claim HRA exemption, you have to stick with the old tax regime. The new one? It’s simpler, sure, but you lose out on most deductions—including HRA. So, if that tax-free rent money matters to you, don’t jump ship to the new regime just yet

HRA Exemption Overview

Old Tax Regime

• Availability: HRA exemption is available under Section 10(13A) of the Income Tax Act.
• Required Documents:
  • Rent receipts
  • Rental agreement
  • Landlord’s PAN or a declaration
• PAN of Landlord: It is mandatory to provide the landlord's PAN if the annual rent exceeds ₹1 lakh.
• Special Cases: Rent paid to parents may be considered, provided that appropriate proof is submitted.

New Tax Regime (2025 Onwards)

• Availability: HRA exemption will not be available.
• Required Documents: Documentation requirements will be eliminated, as HRA claims will no longer apply.
• PAN of Landlord: No requirement for landlord's PAN under this regime.
• Special Cases: Provisions for rent paid to parents will no longer be applicable.

Can You Claim HRA? Quick Checklist

Let’s keep it simple. You’re eligible if:

• You’re a salaried employee and HRA is part of your salary.
• You actually pay rent for your home (not just on paper).
• You don’t own the place you’re living in.
• You can show rent receipts (and sometimes a rent agreement) to your employer.

How Much HRA Can You Actually Save?

Here’s the formula (don’t worry, it’s not scary):

• Actual HRA received (as per your salary slip)
• 50% of salary (if you live in a metro) or 40% (if you’re in a non-metro)
• Rent paid minus 10% of salary (salary = basic + DA, if DA counts for retirement) You get to claim the lowest of these three as your tax-free HRA.

Let’s see this in action:

Suppose Priya works in Bengaluru (non-metro), gets a basic of ₹40,000/month, DA of ₹5,000/month, HRA of ₹18,000/month, and pays ₹22,000/month in rent.

• Actual HRA received: ₹2,16,000
• 40% of salary: ₹2,16,000
• Rent paid minus 10% of salary: ₹2,10,000

So, Priya’s HRA exemption is ₹2,10,000. The rest (₹6,000) is taxable.

What Proof Do You Need?

Don’t skip this part—it’s where most people trip up.

• Rent Receipts & Agreement: Keep those rent receipts for the full year. If your rent is on the higher side, a rent agreement helps.

• Landlord’s PAN: If your annual rent is over ₹1 lakh, you must give your employer your landlord’s PAN. No PAN? Get a declaration from your landlord saying so, plus their ID proof.

Sample Declaration:

“I, Rajesh Kumar, have leased Flat No. 402, Lakeview Apartments, Pune, to Priya Sharma at a monthly rent of ₹22,000. I confirm I do not possess a PAN card.”

Special Scenarios (Because Life Isn’t Always Simple)

• Paying Rent to Parents: Yes, you can claim HRA if you pay rent to your parents (not your spouse—tax folks don’t buy that). But make sure it’s a real arrangement: rent agreement, receipts, bank transfer, the works. And your parents need to show this rent as income on their tax return.

• No Rent Receipts? If your HRA is up to ₹3,000/month, your employer might not ask for receipts. But the tax department can, so don’t fake it.

• Not Getting HRA, but Paying Rent? You might still get a deduction under Section 80GG, but the rules and limits are different.

Avoid These Common Pitfalls

• Don’t claim HRA if you’re not actually paying rent.
• Make sure your HRA claim in your tax return matches what’s in your Form 16.
• Never submit fake receipts or bogus landlord details—penalties are steep.
• Don’t try to claim HRA for a house you own.

How to Actually Claim HRA Exemption

• Calculate your eligible exemption.
• Fill out Form 12BB and give it to your employer with all the proof.
• Missed the deadline? You can still claim it when you file your ITR—just keep your documents ready.

What’s New in Budget 2025?

• Stricter documentation: Landlord’s PAN is a must for rent above ₹1 lakh.
• More compliance checks: The tax department is watching for fake claims.
• No HRA exemption in the new regime: If you want this benefit, stick with the old tax regime.

FAQs (Because You’re Probably Wondering…)

Can I claim HRA under the new tax regime? Nope. Only under the old regime.

What documents do I need? Rent receipts, rent agreement, landlord’s PAN (if rent > ₹1 lakh/year), or a declaration if there’s no PAN.

Can I claim HRA for rent paid to parents? Yes, as long as it’s legit and your parents declare it as income.

Forgot to submit rent receipts to my employer? You can still claim HRA when filing your ITR, just have your documents handy.

Quick Tips to Maximize Your HRA Savings

• Always pay rent by bank transfer or UPI—leave a digital trail.
• Keep every single document (receipts, agreement, landlord’s PAN/declaration).
• Double-check your Form 16 and ITR for matching details.
• When in doubt, talk to a tax pro—especially if you’re paying rent to family.

Taxes are complicated, but with a little planning (and some honest paperwork), HRA can be one of the easiest ways to save. Don’t leave money on the table—get your documents in order, choose the right regime, and claim what’s yours.