Answer

1. F

   Facts

   HRA is the single largest exemption for salaried employees in the old regime. Calculated using a three-number formula. Most employees claim the wrong amount because they use the wrong city classification or the wrong basic salary figure. This can cost ₹20,000–60,000 in overpaid tax.

2. P

   Provisions and law

   • Sec 11 (old 10(13A))
   • Rule 279 (old Rule 2A)
   • Sec 393 (old 194-IB)
3. A

   Analysis

   The three-number formula, always pick the LOWEST: Example: Basic salary ₹40,000/month. HRA received ₹20,000/month. Rent paid ₹22,000/month. City: Delhi (metro). (a) Actual HRA = ₹20,000. (b) Rent − 10% basic = ₹22,000 − ₹4,000 = ₹18,000. (c) 50% of basic = ₹20,000. Minimum = ₹18,000/month = ₹2.16L/year exempt. Balance HRA (₹20K − ₹18K = ₹2,000/month) = ₹24,000/year taxable. Metro vs non-metro (THIS MATTERS): Metro: Delhi, Mumbai, Chennai, Kolkata only. Hyderabad, Bengaluru, Pune, Ahmedabad = NON-METRO (40% basic). Many employees in Bengaluru wrongly use 50%, it is 40%. At basic ₹50,000 in Bengaluru: correct = ₹20,000 (40%); incorrect claim of ₹25,000 (50%) = claiming ₹60,000/year excess exemption → creates risk. Rent to family member: CBDT allows HRA exemption even if rent is paid to parent/spouse, as long as rent is actually paid (bank transfer) and landlord declares income.

4. C

   Conclusion

   1. 1Confirm old regime is selected (HRA exemption only in old regime)
   2. 2Identify all three figures: Actual HRA received per month, Rent paid per month, Basic salary per month
   3. 3Identify city: metro (Delhi/Mumbai/Chennai/Kolkata → 50%) or non-metro (all others → 40%)
   4. 4Calculate all three amounts: (a) actual HRA, (b) rent − 10% of basic, (c) 50%/40% of basic
   5. 5Exemption = lowest of the three amounts × 12 months
   6. 6If rent > ₹1L/year: collect landlord PAN. Submit to employer in Form 124 (old Form 12BB)

General guidance from TaxSavvy’s library of money processes. Laws change; your Savvy confirms the answer on your exact case before anything is filed.