Question 1

What is the three-part HRA exemption formula?

Accepted Answer

Under Schedule III of the Income-tax Act, 2025, eligible HRA exemption is the least of actual HRA received, 50% of qualifying salary for Mumbai/Kolkata/Delhi/Chennai (40% elsewhere), and rent paid minus 10% of qualifying salary. Qualifying salary includes basic pay plus retirement-benefit DA and turnover-based commission where applicable.

Question 2

What landlord information may payroll request for an HRA claim?

Accepted Answer

Employer payroll evidence instructions have required landlord PAN when annual rent exceeds ₹1,00,000, with a declaration route where the landlord has no PAN. Keep the lease, rent receipts and payment evidence and follow the current Tax Year 2026-27 salary-information form; this payroll threshold is not the HRA exemption formula itself.

Question 3

Can I pay rent to my parents and claim HRA tax exemption?

Accepted Answer

The relationship alone neither allows nor disallows HRA exemption. A genuine tenancy and occupancy, actual traceable rent payment, ownership and supporting evidence are required, and the recipient’s tax reporting should be consistent. A circular or sham arrangement can be rejected on its facts.

Question 4

When can an individual tenant need to deduct TDS from rent?

Accepted Answer

The applicable current Section 393 rent row can require an individual or HUF outside tax-audit withholding to deduct 2% when rent exceeds ₹50,000 for a month or part of a month. Use the Tax Year 2026-27 portal workflow and notified form rather than assuming a legacy form number remains current.

Question 5

Is HRA rent exemption available under the New Tax Regime (Budget 2026)?

Accepted Answer

No. The Schedule III HRA exemption is not available when income is computed under the default Section 202 regime. It can be relevant under the alternative regime when all employment, rent and evidence conditions are met.

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