Since the Indian government made the New Tax Regime the default selection, one of the most common questions from salaried employees is: "Can I still claim HRA (House Rent Allowance) exemption?"
The short answer is No. You cannot claim HRA exemption under the new tax regime.
But before you decide whether that makes the new regime "bad" for you, let’s break down exactly how it works for FY 2025-26 and what you should consider when filing your taxes or declaring your investments to HR.
Why is HRA Exempt Only in the Old Regime?
The Indian Income Tax system now offers you a choice between two structures:
- The Old Regime: Higher tax rates (slabs), but allows you to reduce your taxable income using multiple exemptions and deductions—most notably Section 80C (up to ₹1.5 lakh), Section 80D (Health Insurance), and Section 10(13A) for HRA.
- The New Regime: Lower, more relaxed tax rates, but with almost all exemptions wiped out. The goal of the new regime is simplicity.
Because the new regime focuses on lower flat rates without the hassle of submitting proofs, major exemptions like HRA, Leave Travel Allowance (LTA), and Chapter VI-A deductions are disabled.
The One Exception for Salaried Employees
While you lose HRA, it's important to remember that not all deductions are gone in the new regime. Salaried employees still get the Standard Deduction of ₹75,000.
So, if your salary is ₹12,00,000, your taxable income under the new regime is immediately reduced to ₹11,25,000—without submitting a single rent receipt or investment proof. Additionally, employer contributions to NPS (Section 80CCD(2)) remain deductible.
Should I Switch to the Old Regime to Save HRA?
If you pay a significant amount of rent, the old regime might still save you more tax, despite its higher slab rates.
To make this decision, you need to calculate your "breakeven point." Ask yourself:
Are my total deductions (HRA + 80C + 80D + others) greater than ₹3,75,000?
If they are, the Old Regime is usually better. If they are less, the New Regime is likely more beneficial, and losing the HRA exemption won't hurt your wallet.
Example Scenario
Let's say your basic salary is exactly ₹6,00,000, your HRA component is ₹3,00,000, and you pay ₹25,000 a month in rent (₹3,00,000 yearly) for an apartment in Bengaluru (a non-metro city for IT calculation purposes).
Your HRA exemption in the old regime would be the least of:
- Actual HRA received: ₹3,00,000
- 40% of Basic: ₹2,40,000
- Rent Paid minus 10% of Basic: ₹3,00,000 - ₹60,000 = ₹2,40,000
So, you get an exemption of ₹2,40,000.
If you also max out 80C (₹1.5L) and 80D (₹25k), your total deductions are ₹4,15,000. In this case, you should actively switch back to the Old Regime when submitting proofs to HR, because your deductions are high enough to outweigh the higher slab rates.
How to Check Which is Better for You
You don't need to do complex math on a spreadsheet.
- First, use our HRA Calculator to see exactly how much exemption you are eligible for under the old regime rules.
- Then, plug that number into our Old vs New Tax Regime Comparator.
The comparator will show you a side-by-side breakdown of your tax liability under both systems, taking your rent receipts into account.
What if I choose the Old Regime?
If you conclude that the Old Regime is better for you, remember that you will need to submit valid proof of rent paid to your employer. Make the process painless by using our Rent Receipt Generator to instantly create a 1-year bulk PDF for your HR portal!