ITR Filing 2025: Save Big on Taxes with HRA Claim – Avoid These Common Mistakes

If you're a salaried employee living in a rented house, House Rent Allowance (HRA) can help you save a significant amount on income tax. However, even a small mistake while claiming HRA can lead to rejection by the Income Tax Department. Here's everything you need to know to claim HRA correctly under the Old Tax Regime.

💡 What is HRA and Who Can Claim It?

HRA is the allowance your employer provides to help you pay rent. Under Section 10(13A) of the Income Tax Act, this amount can be partially or fully exempt from tax — but only under the Old Tax Regime.
The New Tax Regime does not allow any exemption for HRA.

✅ Conditions to Claim HRA

To successfully claim HRA, the following conditions must be met:

You must be a salaried employee.

You should be living in a rented house.

Rent must be actually paid to the landlord.

You should have proof of rent payment like rent receipts or a valid rent agreement.

If paying rent to parents, they must report it as income in their ITR.

📊 How to Calculate HRA Exemption?

The HRA exemption is the lowest of the following three amounts:

Actual HRA received from employer

50% of salary (Basic + DA) if living in a metro city (40% for non-metros)

Actual rent paid – 10% of salary (Basic + DA)

Example: If your Basic salary is ₹30,000, DA is ₹5,000, HRA received is ₹15,000, and rent paid is ₹20,000 — your exemption will be based on the least of the above three.

⚠️ Mistakes That Can Get Your HRA Claim Rejected

• Submitting fake rent receipts

• Inflating the rent amount falsely

• No rent agreement or proof of rent payment

• Not reporting rent income if paid to parents

• Failing to submit the landlord’s PAN (mandatory if rent exceeds ₹1 lakh/year)

📁 Documents Required for HRA Claim

• Rent Agreement

• Monthly Rent Receipts

• Landlord’s PAN (if rent > ₹1,00,000/year)

• In case of rent paid to parents, their ITR should reflect that rent income

Note: These documents must typically be submitted to your employer’s finance department by January each year for exemption processing.

🧾 How HRA Helps You Save Taxes

HRA is one of the most effective tools for tax-saving if you live in a rented accommodation. The amount of tax saved depends on your city of residence, salary structure, and actual rent paid. However, incorrect documentation or attempts to misuse the provision can lead to disqualification, penalties, or legal action.

Final Tip

Planning your taxes wisely is just as important as earning your salary. Use HRA claims the right way — with proper documentation and honesty — to reduce your tax burden and avoid unnecessary scrutiny from the tax department.

Stay compliant, stay stress-free!