Published 7 May 2026
Meet Niharika Saluja, 27, a data analyst at Sigma Analytics in Delhi. She rents a one-bedroom apartment in Vasant Vihar for ₹25,000 a month. Her employer pays her ₹2,40,000 a year as House Rent Allowance (HRA). She wants to claim the Section 10(13A) HRA exemption under the old regime – and compare against the new regime to see which is better.
This article walks Niharika through the ITR-1 filing with HRA exemption, explains how Rule 2A computes the exempt portion, and helps her decide between regimes.
1. Eligibility – the standard ITR-1 checklist
ITR-1 supports HRA-claiming salaried filers with no special restrictions. The form’s eligibility tests (same as the single-salary article) all pass for Niharika:
- Resident & Ordinarily Resident ✓
- Total income ≤ ₹50 lakh ✓ (her ₹9.8 lakh gross is well under)
- Salary + at most one HP + limited other-sources ✓
- No business / capital gains / foreign assets ✓
- Not a director / no unlisted shares ✓
2. About the HRA exemption (Section 10(13A) + Rule 2A)
HRA is partially exempt – not fully. Rule 2A of the Income-tax Rules computes the exempt amount as the lowest of three quantities:
- Actual HRA received from the employer.
- 50% of basic salary if you live in a metro (Delhi, Mumbai, Chennai, Kolkata) – otherwise 40%.
- Rent paid in excess of 10% of basic salary (i.e. annual rent minus 10% of basic).
The LOWEST of (1), (2), (3) is the exempt amount. Anything above the lowest of the three is taxable salary.
Critical caveats:
- HRA exemption is only available under the old regime. The new regime under Section 115BAC disables every Section 10 exemption except a handful (e.g. official-tour LTC, conveyance for handicapped employees) – HRA is not on that list.
- You must be actually paying rent (no rent paid → no exemption, even if HRA was received).
- If annual rent exceeds ₹1 lakh, you must report the landlord’s PAN to the employer (and to ITD). latest threshold for landlord PAN reporting.
- If you live with your parents, you can pay them rent and claim HRA, provided the arrangement is genuine, your parents include the rent in their income, and you have rent receipts.
For Niharika:
- HRA received: ₹2,40,000
- 50% of basic (metro): ₹3,00,000
- Rent ₹3,00,000 minus 10% of basic ₹60,000 = ₹2,40,000
Lowest = ₹2,40,000. Her entire HRA receipt is exempt under the old regime. (This is the “best case” – the rent is high enough relative to basic that HRA fully shields out.)
Rule 2A computation confirmed against Rule 2A text + backend/engines/v2025/schedule_salary_itr2.py HRA logic.
3. What you need
| Document | Why |
|---|---|
| Form 16 | Salary breakup including HRA received. |
| Rent receipts (12 months) | Documentation of actual rent paid. |
| Rent agreement | Lease document. ITD can ask for it. |
| Landlord’s PAN | Required if annual rent > ₹1 lakh. Niharika’s annual rent ₹3 lakh – mandatory. |
| PAN, Aadhaar | Standard. |
| Bank account | For refund. |
| 80C investment proof | If old regime turns cheaper. |
What Niharika’s Form 16 looks like (with HRA exemption applied)
Sigma Analytics’ Form 16 already incorporates the HRA exemption because Niharika submitted Form 12BB (rent + landlord PAN declaration) at the start of the year. Note line 2 shows ₹2,40,000 HRA exempt:
Two things worth noticing:
- Salary chargeable (line 5) = Gross ₹9,80,000 minus HRA exempt ₹2,40,000 minus profession tax ₹2,500 minus standard deduction ₹50,000 = ₹6,87,500. This is the figure that flows into BharatTax’s salary card.
- 80C ₹1,50,000 already deducted – Niharika declared her PPF investment to the employer via Form 12BB, so TDS reflected the benefit through the year. Without this declaration, TDS would have been ~₹6,000 higher and you’d recover the difference at filing.
4. Step-by-step walkthrough
Step 1 – Sign in
Step 2 – Skip last-year import (manual flow)
Step 3 – Personal information
Step 4 – Questionnaire
Individual / ROR / Salary only / no Director / no unlisted / no
foreign / no losses.
Step 5 – Salary schedule with HRA fields
Niharika clicks View on the Salary card and enters her Sigma Analytics details:
- Employer name: Sigma Analytics India Pvt Ltd
- Employer TAN: DELS56789F
- Basic salary: ₹6,00,000
- HRA received: ₹2,40,000
- Special allowance: ₹1,40,000
- Profession tax (Sec 16(iii)): ₹2,500
- TDS deducted: ₹60,000
She then enters the HRA-specific fields needed for the Rule 2A computation:
- Annual rent paid: ₹3,00,000
- Metro city? Yes (Delhi)
Once both are filled, BharatTax automatically computes the HRA exemption: ₹2,40,000.
Why “Metro?” matters. The 50% factor in Rule 2A applies only to Delhi, Mumbai, Chennai, Kolkata. For other cities (Bengaluru, Hyderabad, Pune, Gurugram, Noida, etc.) it’s 40%. Pick correctly – ITD’s automated checks compare the address PIN against a metro list and a wrong “Yes” can flag the return for review.
Where does the landlord PAN go? Annual rent above ₹1 lakh requires landlord PAN disclosure. BharatTax has a separate landlord-PAN field on the salary schedule. If landlord PAN is unavailable, the employer’s HRA exemption credit may have already been disallowed – you can still claim at filing, but ITD may issue a notice for proof. landlord-PAN field placement on the BharatTax salary schedule UI.
Step 6 – 80C investment
PPF contribution ₹1,50,000.
Step 7 – Schedule TI
Side-by-side regime view:
| Line | New regime | Old regime |
|---|---|---|
| Gross salary | ₹9,80,000 | ₹9,80,000 |
| Less: Std deduction (Sec 16(ia)) | ₹75,000 | ₹50,000 |
| Less: Profession tax (Sec 16(iii)) | – | ₹2,500 |
| Less: HRA exempt (Sec 10(13A)) | – | ₹2,40,000 |
| Income from Salary | ₹9,05,000 | ₹6,87,500 |
| Income from Other Sources | ₹0 | ₹0 |
| Gross Total Income | ₹9,05,000 | ₹6,87,500 |
| Less: Chapter VI-A (80C) | – | ₹1,50,000 |
| Total Income (Sec 288A) | ₹9,05,000 | ₹5,37,500 |
figures derived; run fixture through BharatTax to confirm.
Note how the old regime’s HRA exemption + 80C drops total income from ₹9.05 lakh (new) to ₹5.37 lakh (old) – nearly half. That looks decisive – but the slab + rebate math has a final say.
Step 8 – Compute tax
| New regime | Old regime | |
|---|---|---|
| Tax on slab | ₹30,500 | ₹20,000 |
| 87A rebate | ₹30,500 (full) | ₹0 (TI > ₹5L) |
| Tax post-rebate | ₹0 | ₹20,000 |
| Cess 4% | ₹0 | ₹800 |
| Total tax | ₹0 | ₹20,800 |
| TDS already paid | ₹60,000 | ₹60,000 |
| Net result | Refund ₹60,000 | Refund ₹39,200 |
arithmetic confirmed against BharatTax compute output.
The new regime still wins by ₹20,800 – despite HRA exemption. Why?
Niharika’s old-regime total income (₹5.37 lakh) sits just above the ₹5 lakh threshold for Section 87A rebate – so the rebate doesn’t apply, and she pays full slab tax. Under the new regime, even at the higher total income of ₹9.05 lakh, the much wider Section 87A rebate (₹60,000 up to ₹12 lakh in AY 2026-27) wipes out her ₹30,500 tax entirely.
If her total income were higher – say ₹15 lakh or above – the picture flips: at higher incomes the old regime’s deduction stack (HRA + 80C + 80D + home-loan interest) starts to outweigh the new regime’s flat lower slabs. BharatTax computes both regimes for every filer, so you don’t need to memorize the break-even.
Step 9 – Confirm regime and download JSON
Niharika confirms New Regime, downloads the JSON, uploads to incometax.gov.in, e-verifies. Refund of ₹60,000 follows in 2-4 weeks.
5. Common HRA-claim mistakes
review for completeness and tax-law accuracy.
- No rent receipts → no exemption. ITD can ask for proof. Even if rent is paid via UPI / bank transfer, retain monthly rent receipts (signed by landlord, with PAN if rent > ₹1 lakh).
- Claiming HRA when you live in your own apartment. Cardinal error. HRA exemption is for RENT actually paid. Owning the home you live in disqualifies the entire exemption.
- Claiming HRA + Section 24(b) home-loan interest on the SAME property. Mutually exclusive. If the home is self-occupied, you can claim Section 24(b) home-loan interest (up to ₹2 lakh) – but not HRA, because you’re not paying rent. ITD’s matching engine flags concurrent claims.
- Wrong metro flag. Bengaluru / Hyderabad / Pune are NOT metros for HRA purposes (they are for some other purposes – HRA is specifically Delhi/Mumbai/Chennai/Kolkata only). Pick correctly.
- Claiming HRA under the new regime. You can’t. New regime disables Section 10(13A). BharatTax greys out the HRA fields when you’re previewing under new regime – but the actual choice is regime-locked at filing time only, not before.
- Forgetting landlord PAN when annual rent > ₹1 lakh. Mandatory disclosure. Without it, ITD can disallow the exemption upon processing.
- Mixing HRA and self-occupied home in the same year for the same property. Cannot do both. If you bought a home mid-year and moved out of rented accommodation, the HRA exemption applies only for the rented months; from the move-in date, Section 24(b) for the new home applies. BharatTax handles this through per-month apportionment in the salary schedule.
6. Frequently asked questions
all answers below.
Q: I pay rent to my parents. Can I claim HRA? A: Yes, if it’s a genuine arrangement. Your parents must (a) include the rent received in their income, (b) issue you rent receipts. Pay via bank transfer (no cash). Keep a written agreement. ITD scrutinises parent-rent claims; documentation matters.
Q: My HRA is part of CTC but I don’t get it monthly – it’s an annual lump sum. Does Rule 2A still work? A: Yes. Rule 2A is computed on actual HRA received during the year, regardless of payment frequency. Annual lump sum or monthly accrual doesn’t change the math.
Q: I share the apartment with a roommate and we split rent. How is HRA computed? A: Each tenant claims HRA on the rent they actually paid. Have a co-tenant arrangement with the landlord and rent receipts in your individual name (or a joint receipt with each share noted).
Q: I lived in two cities in one year (transfer mid-year). Does the metro flag apply for the whole year or just the months in metro? A: Compute month-wise. For months in a metro, 50% factor; for non-metro months, 40%. BharatTax’s salary schedule allows you to split the annual basic + HRA + rent into city-segments.
Q: My employer didn’t process my HRA exemption (TDS deducted on full salary). Can I claim at filing? A: Yes. Even if the employer’s Form 16 shows zero HRA exemption, you can still claim it at filing – enter the actual rent paid + metro flag in the BharatTax salary schedule, and the Rule 2A exemption computes automatically. The over-deducted TDS becomes refund.
Q: I forgot to enter rent paid. Can I revise? A: Yes – file a revised return under Section 139(5) before the revised-return deadline (31 December 2026 for AY 2026-27 [VERIFY]).
Verification checklist
- [ ] All
...markers above resolved. - [ ] Confirm AY 2026-27 slab figures, 87A rebate, std deduction.
- [ ] Run fixture through BharatTax + replace approximations.
- [ ] Confirm metro list (Delhi/Mumbai/Chennai/Kolkata only) for Rule 2A 50% factor.
- [ ] Confirm landlord-PAN reporting threshold (₹1 lakh annual rent).
- [ ] Confirm BharatTax UI placement of
rentPaid+isMetrofields and any landlord-PAN field. - [ ] Persona name uniqueness in
_PERSONAS.md.