₹2,88,000 HRA tax free, yet the new regime wins
TaxSavvy for HRA exemption
Paying rent? Claim every rupee of HRA.
We work out your exempt HRA, the proofs HR needs and rent receipts.
How we get it done
Four steps, the same for every job. You see each one ticked.
Information
PAN. Form 130 (old Form 16), last year
Discussion
Monthly rent and city?. Paying rent to parents?
Forms
HRA Calculator. Regime decision with HRA
Deliverables
HRA exemption in ₹ + regime advice
See what you get, free
Real formats, made with dummy data.
Sample Sample ₹21,300 left every month
Sample ₹36,280 less tax in the new regime
Questions, answered the CA way
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
HRA Exemption: Metro vs Non-Metro (Section 11, old 10(13A))
- 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 to 60,000 in overpaid tax.
- Provisions and law
- Sec 11 (old 10(13A)); Rule 279 (old Rule 2A); Sec 393 (old 194-IB); CBDT Circular 8/2013
- 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.
- Conclusion
- Confirm old regime is selected (HRA exemption only in old regime)
- Identify all three figures: Actual HRA received per month, Rent paid per month, Basic salary per month
- Identify city: metro (Delhi/Mumbai/Chennai/Kolkata → 50%) or non-metro (all others → 40%)
- Calculate all three amounts: (a) actual HRA, (b) rent − 10% of basic, (c) 50%/40% of basic
Angel Tax: Section 56(2)(viib) and Exemptions
- Facts
- The most feared provision in startup funding. When a startup raises money from an angel investor at a valuation higher than the "Fair Market Value" computed by the tax department, the premium is taxed as income in the startup's hands, even though it is investment capital. A ₹1Cr raise can generate a ₹30-40L tax demand. DPIIT recognition is the primary shield.
- Provisions and law
- Sec 56(2)(viib); Rule 11UA; DPIIT Exemption; Category I AIF; Finance Act 2024
- Analysis
- How angel tax hits in practice: Startup valued at ₹5Cr by angel investor. Angel invests ₹50L for 1% equity. Revenue at time of investment: ₹20L. DCF FMV computed by CBDT: ₹1.5Cr (based on your current numbers). Angel tax: (₹50L investment − FMV proportion) = notional premium of ₹35L. Tax at 30%: ₹10.5L. The startup just paid ₹10.5L tax on money raised, before spending a single rupee on growth. DPIIT recognition is the cleanest solution: Apply BEFORE raising money. Takes 2 days. Free. On recognition: Sec 56(2)(viib) does not apply if investor is a resident individual and the startup satisfies the recognition criteria. No angel tax, no FMV calculation needed. Period. If already received investment and don't have recognition: Get a chartered accountant to compute FMV using DCF method NOW, document it. If FMV ≥ investment amount: no angel tax exposure.
- Conclusion
- If raising or planning to raise: apply for DPIIT recognition BEFORE issuing shares
- Confirm investor category: SEBI-registered AIF (no angel tax), resident individual (need DPIIT), NRI (need DPIIT now as of 2024)
- If not DPIIT-recognised: get CA to compute FMV using DCF method before share allotment
- FMV computation: DCF or NAV, choose whichever is HIGHER to minimise taxable "premium"
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.
Paying rent? Claim every rupee of HRA.
A Chartered Accountant handles it. Fixed price, told before you pay.
Get it done on WhatsApp