While filing Income Tax Returns (ITR) for AY 2026-27, many salaried taxpayers are facing a common issue — the House Rent Allowance (HRA) exemption option is not visible in the ITR utility. Since HRA is one of the most widely used salary exemptions for individuals living in rented accommodation, this often creates confusion during return filing.
In most situations, the issue is not a technical error in the ITR portal. The primary reason is the tax regime selected by the taxpayer. HRA exemption is available only under the old tax regime, and if the new regime is selected, the HRA field generally does not appear in the allowances section of the return.
Understanding the correct tax regime selection, eligibility conditions, and HRA calculation method is essential to ensure accurate filing and avoid future scrutiny from the Income Tax Department.
A large number of taxpayers directly begin filing their return using the salary details available in Form 16 without verifying the selected tax regime in the ITR utility. In many cases, the new tax regime remains selected by default.
Since the new regime does not permit most salary exemptions and deductions, the HRA exemption option under Section 10(13A) may not be visible.
To claim HRA exemption correctly, taxpayers must:
Once the old regime is selected, the HRA exemption field generally becomes available under the salary allowances section.
The old tax regime allows various deductions and exemptions that are restricted under the new regime.
Under the old regime, taxpayers can claim benefits such as:
In contrast, the new tax regime offers lower slab rates but disallows most exemptions and deductions, including HRA.
Therefore, taxpayers should compare both regimes carefully before filing the return.
One important misconception among taxpayers is that the entire HRA received from the employer automatically becomes tax-free. In reality, HRA exemption is calculated using a prescribed formula under the Income Tax Act.
The exempt amount is the least of the following:
For HRA computation, salary generally includes:
The percentage limit for HRA exemption depends upon whether the employee resides in a metro or non-metro city.
Traditionally, the following are treated as metro cities:
For these cities, 50% of salary is considered for HRA calculation.
For all other cities, including most tier-2 and tier-3 locations, the limit is 40% of salary.
This distinction significantly impacts the exempt amount available to taxpayers.
While entering HRA details in the ITR utility, taxpayers may need to provide:
The utility usually contains auto-calculated grey fields and manually editable white fields. Once all relevant details are entered correctly, the exempt HRA amount is computed automatically.
For example, even if a taxpayer receives annual HRA of ₹1,00,000 and pays annual rent of ₹1,20,000, the full HRA may still not qualify for exemption because the calculation strictly follows the statutory formula.
HRA claims require careful reporting and proper supporting documentation. Even small mismatches can result in notices or scrutiny.
Key practical considerations include:
One common mistake is manually claiming HRA exemption in the ITR even when the employer has not considered it in Form 16. Such mismatches may trigger automated notices from the Income Tax Department.
The choice between the old and new tax regimes depends on the taxpayer’s salary structure, eligible deductions, and overall tax planning.
The old regime may be beneficial for taxpayers who claim:
The new regime may suit taxpayers who have limited deductions and prefer simplified tax compliance with lower slab rates.
A proper comparison should always be done before filing the return.
HRA exemption remains one of the most valuable tax-saving benefits for salaried employees residing in rented accommodation. However, this benefit can be claimed only under the old tax regime.
Many taxpayers fail to see the HRA option in the ITR utility simply because the new regime is selected by default. Proper regime selection, accurate disclosure of salary details, and correct HRA computation are essential for compliant and error-free return filing.
Before submitting the return, taxpayers should carefully compare both tax regimes, verify Form 16 details, and ensure that all HRA claims are properly supported with documentation.
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