According to The Times of India, taxpayers opting for the old income tax regime can claim House Rent Allowance (HRA) exemption, which is not available under the new tax regime. The exemption is available only to salaried employees who receive HRA as part of their salary and live in rented accommodation. For FY 2025-26, where rented accommodation is situated in the four metro cities—Delhi, Mumbai, Kolkata, or Chennai, the exemption is computed with reference to 50% of salary, while in all other cases, the limit is 40% of salary. As per The Times of India, the exemption is calculated as the lowest of three amounts: (1) Actual HRA received, (2) 50% of basic salary if living in a metro city or 40% for non-metro cities, and (3) Rent paid minus 10% of basic salary. The calculation uses salary defined as basic salary plus dearness allowance plus commission based on fixed percentage of turnover, excluding other allowances.
The HRA exemption is limited to the lowest of the following: (1) Actual HRA received, (2) 50% of basic salary if living in a metro city or 40% for non-metro cities, and (3) Rent paid minus 10% of basic salary. According to The Times of India, taxpayers claiming HRA should keep in mind that where monthly rent is ₹50,000 or more, the tenant may be required to deduct tax at source and comply with prescribed reporting requirements. For rent paid to relatives, the arrangement should be genuine and properly documented, with the recipient relative appropriately disclosing rental income in their income tax return. As per The Times of India, tax expert Tanu Gupta from Mainstay Tax Advisors LLP, the requirement to provide detailed information in Schedule EA appears to be aimed at strengthening verification mechanisms and reducing instances of incorrect or unsupported HRA claims.
According to The Times of India, for FY 2025-26 (AY 2026-27), the return utility introduces a new Schedule EA [Section 10(13A)] for reporting HRA exemption. Instead of merely entering the exempt amount, taxpayers are now required to furnish details such as salary, HRA received, rent paid, and the applicable percentage of salary (50% or 40%, as the case may be). Based on these inputs, the utility automatically computes the eligible exemption. Consequently, taxpayers may not find Section 10(13A) HRA exemption separately listed in the drop-down menu under exempt allowances. As per tax expert Tanu Gupta from Mainstay Tax Advisors LLP, the requirement to provide detailed information in Schedule EA appears to be aimed at strengthening verification mechanisms and reducing instances of incorrect or unsupported HRA claims.
As reported by The Times of India, taxpayers claiming HRA should retain rent receipts, lease agreements, proof of rent payments, and other supporting documents, as these may be called for during assessment or verification proceedings. According to The Times of India, taxpayers must submit these documents to their employer through Form 12BB during the year to ensure correct TDS calculation. If HRA details were not furnished to the employer during the year, the taxpayer may still claim the eligible HRA exemption while filing the income tax return, subject to maintaining adequate supporting documentation. However, if these details were not furnished to the employer, any excess TDS will be refunded as per ITR calculation priority. As per The Times of India, taxpayers claiming HRA exemption must provide the landlord's PAN if annual rent exceeds ₹1 lakh, or a signed declaration if the landlord has no PAN. The requirement to disclose relationship with the landlord when claiming HRA becomes mandatory from 1 April 2026, particularly for family members.
According to The Times of India, the Income-tax Rules, 2025 have expanded the list of cities eligible for the higher 50% salary threshold to include Bengaluru, Hyderabad, Pune and Ahmedabad. However, this amendment takes effect from 1 April 2026 and, therefore, will apply from FY 2026-27 (AY 2027-28) onwards and not for FY 2025-26. The expansion means that taxpayers living in these additional metro cities will benefit from the higher 50% salary threshold for HRA exemption calculations. From FY 2026-27 onwards, four more cities—Bengaluru, Hyderabad, Pune, and Ahmedabad—will be added to the metro list, taking it to eight cities eligible for the 50% rate. For FY 2025-26, only four cities count as metro: Delhi, Mumbai, Kolkata, and Chennai, with all other cities treated as non-metro using the 40% rate.
