HRA Exemption in the New Tax Regime: What You Need to Know

HRA exemption is not available in the new tax regime. If you pay significant rent, this is one of the key reasons the old regime may save you more. Here is the full picture.

HRA exemption is not available under the new regime

This is one of the most frequently misunderstood aspects of the new tax regime. House Rent Allowance (HRA) exemption under Section 10(13A) is not available if you opt for the new tax regime.

If you receive HRA as part of your salary and pay rent, the full HRA received is included in your taxable income under the new regime. There is no deduction for the rent you pay. The CBDT Circular No. 4/2023 explicitly lists Section 10(13A) as an exemption that cannot be claimed under the new regime.

What is HRA exemption?

Under the old regime, the HRA exemption is the portion of your HRA that is not subject to income tax. It is calculated under Section 10(13A) of the Income Tax Act using a three-part formula: the exemption is the lowest of:

Actual HRA received from employer

50% of basic salary (for metro cities: Delhi, Mumbai, Kolkata, Chennai) or 40% (for all other cities)

Rent paid minus 10% of basic salary

Any HRA above this exempted amount is fully taxable.

Example: Basic = ₹60,000/month, HRA received = ₹30,000/month, Rent paid = ₹25,000/month, Metro city

Actual HRA = ₹30,000

50% of basic = ₹30,000

Rent − 10% of basic = ₹25,000 − ₹6,000 = ₹19,000

HRA exemption = ₹19,000/month = ₹2,28,000/year

This ₹2,28,000 is deducted from income before tax computation in the old regime. Under the new regime, the full ₹3,60,000 annual HRA is taxable.

The tax impact of losing HRA in the new regime

For someone in the 15% slab (₹12–16L taxable income) under the new regime, losing ₹2,28,000 in HRA exemption costs approximately ₹34,200 in additional tax (₹2,28,000 × 15% × 1.04 cess). At the 20% slab, it is ₹47,424.

This is why HRA is often the decisive factor in the old vs new regime comparison for metro-based salaried employees.

Rent deduction without HRA: Section 80GG

If you do not receive HRA from your employer (common for some self-employed individuals and those with consolidated salaries), you can claim a deduction under Section 80GG in the old regime — up to ₹60,000 per year or 25% of income, subject to conditions.

Section 80GG is also not available under the new regime. The CBDT Circular No. 4/2023 confirms this.

When HRA makes the old regime worth choosing

The HRA exemption is large enough to tip the balance toward the old regime in several scenarios:

Metro city, significant rent:

A salaried employee with ₹18L gross, paying ₹25,000/month rent in Mumbai with a basic of ₹8L/month, might have an HRA exemption of ~₹2.5L. Combined with 80C (₹1.5L), 80D (₹25K), and standard deduction (₹75K), total deductions = ~₹5L. Old regime taxable: ₹13L. New regime taxable: ₹17.25L.

Old regime tax ≈ ₹1.95L. New regime tax ≈ ₹1.56L. New regime still wins — but just barely.

Add a home loan interest deduction of ₹2L, and the old regime pulls ahead.

The calculation is always income-specific. Use the [old vs new tax regime calculator](/tools/tax-regime-calculator) with your actual HRA, rent, and basic salary figures to see the precise comparison.

Should you claim HRA and stay in old regime?

If you are paying significant rent and receiving HRA, the question is whether the HRA exemption (plus other deductions) is large enough to make the old regime's higher slab rates worthwhile.

As a rough guide:

If your total deductions (HRA + 80C + 80D + home loan interest) exceed ₹3.5–4L above standard deduction, the old regime is often competitive for incomes above ₹12.75L
Below ₹12.75L gross (salaried), the new regime's zero-tax outcome wins regardless of deductions
HRA alone is rarely enough to tip the balance at incomes below ₹15L

How to claim HRA in the old regime

To claim HRA exemption under the old regime:

Declare your HRA to your employer along with your monthly rent paid and landlord's PAN (required if annual rent exceeds ₹1 lakh)

Submit rent receipts if requested by your employer

Your employer will reduce TDS accordingly

Claim the exemption in your ITR under the "Salaries" income section

If your landlord does not have a PAN, you can still claim HRA by submitting a declaration from the landlord — CBDT has clarified this in the past, though employers typically still require PAN for high rent amounts.