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TaxSavvy for ₹12.75 L to ₹25 L, pays rent

You pay rent every month. Find out if HRA saves you more than the new regime.

₹12.75 L to ₹25 L, lives on rent

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  • Employee claims to employer, Form 124 (earlier Form 12BB)
  • Complete salaried tax plan

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  • Salary slip
  • Rent receipts
  • Form 16
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Facts, Provisions and law, Analysis, Conclusion.

  • HRA Exemption, Metro vs Non-Metro: The Exact Formula
    Facts
    HRA exemption is the largest salary deduction for most salaried employees, but the most commonly computed wrong. The 4-city metro rule (Delhi, Mumbai, Chennai, Kolkata only) is where most people err. Bengaluru, Hyderabad, Pune, Ahmedabad are NOT metro. Using 50% instead of 40% for non-metro cities = excess exemption claim = tax demand. The correct formula is always the MINIMUM of three amounts.
    Provisions and law
    Sec 11 (old 10(13A)); Rule 279 (old Rule 2A); CBDT Circular; Sec 393 (old 194-IB) link
    Analysis
    The three-number formula, always the LOWEST: Basic ₹40,000/month. HRA received ₹18,000/month. Rent paid ₹20,000/month. City: Bengaluru (NON-METRO = 40%). (a) Actual HRA = ₹18,000. (b) Rent − 10% basic = ₹20,000 − ₹4,000 = ₹16,000. (c) 40% of basic = ₹16,000. Minimum = ₹16,000/month × 12 = ₹1,92,000/year exempt. Balance HRA (₹18K − ₹16K = ₹2K/month = ₹24K/year) is taxable. Metro cities, ONLY FOUR: Delhi (includes NCR, Gurgaon, Noida? ONLY Delhi proper = metro). Mumbai. Chennai. Kolkata. That is ALL. Bengaluru: NON-METRO (40%). Hyderabad: NON-METRO (40%). Pune: NON-METRO (40%). Ahmedabad: NON-METRO (40%). Jaipur: NON-METRO. Lucknow: NON-METRO. This is a very common error, tech employees in Bengaluru routinely claim 50% thinking Bengaluru is metro. Wrong. HRA when renting from parents: CBDT has allowed HRA exemption when rent is paid to parents who own the property.
    Conclusion
    • Confirm old regime is selected (HRA exemption only in old regime)
    • Identify: monthly HRA received (from payslip), monthly rent paid (actual), monthly basic salary
    • Identify city: metro (Delhi/Mumbai/Chennai/Kolkata → 50%) or non-metro (all others → 40%)
    • Compute all three amounts: (a) actual HRA, (b) rent−10% basic, (c) 50%/40% × basic
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  • Old vs New Tax Regime: Which Is Better For You?
    Facts
    The most important annual tax decision for every salaried employee. New regime: lower rates, no deductions. Old regime: higher rates, many deductions. The winner depends entirely on HOW MUCH you invest and claim. Rule of thumb: if deductions > ₹3,75,000 per year → old regime is better. Below that → new regime wins. Calculate, don't guess.
    Provisions and law
    Sec 202 (old 115BAC); Finance Act 2023; Finance Act 2024; Old Regime Slabs; Salaried switching
    Analysis
    Break-even deduction analysis, the key table: Income ₹10L. Old regime: taxable = ₹10L − ₹75K std − ₹1.5L Sec 123, Income-tax Act 2025 (old Sec 80C) − ₹25K Sec 126 (old Sec 80D) − ₹2L Sec 22(1)(b) (old Sec 24(b)) = ₹5.5L. Tax = 20% × (₹5.5L − ₹5L) + 12,500 = ₹22,500. New regime: taxable = ₹10L − ₹75K std = ₹9.25L. Tax = 5% × ₹4L (₹3-7L) + 10% × ₹2.25L (₹7-9.25L) = ₹20,000 + ₹22,500 = ₹42,500. OLD REGIME WINS if you have home loan + Sec 123 (old Sec 80C) investments. When new regime wins clearly: (1) No home loan. (2) No Sec 123 (old Sec 80C) investments beyond EPF (which is forced, not a choice). (3) No HRA (own accommodation). (4) Young employee, just started working, no investments yet. (5) Income below ₹7L, new regime Sec 156 (old Sec 87A) rebate makes tax zero. (6) Very high income (₹30L+) where deductions (capped at ₹3.75L) have limited impact on marginal tax.
    Conclusion
    • List all deductions you actually use: Sec 123 (old Sec 80C; EPF + investments), Sec 126 (old Sec 80D; health insurance), Sec 22(1)(b) (old Sec 24(b); home loan interest), HRA
    • Add standard deduction ₹75K to both regime computations
    • Compute actual old regime tax: salary − ₹75K std − Sec 123 (old Sec 80C) − Sec 126 (old Sec 80D) − HRA − Sec 22(1)(b) (old Sec 24(b))
    • Compute new regime tax: salary − ₹75K std − Sec 124 (old Sec 80CCD(2); if activated) → apply new slabs
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  • How much tax can a HUF save: real numbers
    Facts
    HUF gets identical tax slabs to an individual. The savings come from splitting income, some income goes into the HUF's hands and is taxed at HUF level, reducing the individual's taxable income.
    Provisions and law
    Income Tax Act 1961, Sec 115BAC (now 202; new regime slabs)
    Analysis
    Example: Rental income of ₹6L/year. If in your hands (₹30L salary earner) → taxed at 30% = ₹1.8L tax. If in HUF's hands → ₹2.5L exempt, ₹3.5L taxed at lower slabs = ₹5,000 tax. Annual saving: ₹1.75L from one HUF move.
    Conclusion
    • Rental income from HUF-owned property
    • Capital gains from HUF investments
    • Business income if HUF runs a business
    • Interest on HUF bank FDs and investments
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  • HUF as landlord: rental income and property tax strategy
    Facts
    If HUF owns a property (ancestral or purchased from HUF funds), all rental income belongs to HUF, taxed at HUF's slab rate. The HUF can also claim the ₹2L home loan interest deduction under Sec 22, Income-tax Act 2025 (old Sec 24) on the let-out property.
    Provisions and law
    Income Tax Act 1961, Sec 22-27 | Sec 24 (₹2L interest deduction)
    Analysis
    A high-earning individual (30% slab) who shifts rental income into HUF effectively pays 5% tax on the first ₹3.5L of rental income instead of 30%. Annual saving: ₹87,500 on ₹3.5L rental income alone.
    Read the full answer

You pay rent every month. Find out if HRA saves you more than the new regime.

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