Latest HRA tax exemption rules: Step-by-step guide on how to save income tax on house rent allowance under old income tax regime

economictimes.indiatimes.com:

House Rent Allowance (HRA) is a portion of your salary that is not fully taxable, unlike your basic salary. Subject to specific conditions, a portion of the HRA is exempted from taxation under Section 10 (13A) of the Income-tax Act, 1961.

The amount of HRA tax exemption is deducted from the total salary before calculating the taxable income. This helps employees save on taxes. However, it's important to note that HRA received from the employer is fully taxable if the employee lives in their own house or does not pay any rent.

Also read: HRA tax exemption: HRA fraud with illegal usage of PANs detected by tax dept; how to avail House Rent Allowance, proofs

The income tax laws have changed in the new tax regime starting from April 1, 2023. The income tax slabs have been reduced from six to five, the basic exemption limit has been increased to Rs 3 lakh, and standard deduction from salary and pension income has been introduced. The surcharge rate has been reduced for incomes above Rs 5 crore. The new tax regime is the default regime from the assessment year (AY) 2024-25 onwards, and there are no income tax changes for the financial year 2024-25.

If you choose the new tax regime in the current fiscal year 2024-25, you cannot claim tax exemption for HRA. However, if you choose the old tax system and receive HRA, you can claim tax exemption.

Who can avail HRA tax exemption?

This tax benefit is only accessible to salaried individuals who opt for the old tax regime and receive HRA as part of their salary structure while