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HRA Comparison: Old Income Tax Act (1961) vs. New Tax Bill 2025

House Rent Allowance (HRA) is a key component of tax planning for salaried individuals. The proposed New Tax Bill 2025 refines HRA provisions, consolidating rules and introducing clearer categories. Here’s a side-by-side comparison of how HRA is treated under the Old Income Tax Act, 1961 versus the New Tax Bill 2025.

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1. Definition and Treatment

Feature	Old Income Tax Act, 1961	New Tax Bill 2025
HRA as Exemption	Exemption under Section 10(13A) for HRA received by salaried employees.	Exemption as a “special allowance” under Section 19(11), specifically for rent.
Perquisite (Employer-Provided Accommodation)	Taxed as perquisite under Rule 3 of Income Tax Rules: lower of (rent paid by employer), (15%–10% of salary), or (fair rent–rent paid).	Taxed under Section 17(1)(a)–(c) as perquisite. Valuation rules will be notified, but concept remains: rent-free or concessional accommodation taxed on fair rent basis.

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2. Calculation of Exemption

Component	Old Act Formula	New Bill Formula
HRA Exemption (Employee-Paid Rent)	Least of: 1) Actual HRA received2) Rent paid minus 10% of salary3) 50% of salary (metro) or 40% of salary (non-metro)	Same three-condition approach, but under a clear “special allowance” entry. Exact limits and city-based percentages will be specified in rules.

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3. Conditions & Documentation

Condition	Old Act Requirements	New Bill Requirements
Proof of Rent	Rent receipts; landlord PAN if annual rent > ₹1 lakh.	Similar: rent receipts and lease agreements; landlord details as per rule notification.
Occupancy	Property must not be owned by the employee or spouse.	Identical condition: accommodation must be rented and not owned.
Period of Occupancy	Entire financial year or any part thereof.	Same requirement applies.

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4. Special Provisions and Exceptions

Provision	Old Act	New Bill 2025
Multiple Properties	Exemption for one rented property; other properties treated as “deemed let-out.”	Continues: HRA special allowance applies only to one residence. Others taxed under house property rules.
Joint Home Loan & HRA	No restriction on claiming HRA and home loan interest separately.	Same flexibility retained.
High-Income Visitors	No specific provision.	For Indian citizens/PIOs with income > ₹15 lakh, 60-day threshold increased to 120 days for HRA eligibility.

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5. Tax Filing and Compliance

Aspect	Old Act	New Bill 2025
Declaration in ITR	HRA exemption declared under “Income from Salary.”	HRA exemption declared under “Special Allowances” section in ITR.
Rule Notifications	Valuation and limits specified in Income Tax Rules.	Detailed rules for perquisites and special allowances to be notified, aiming for clarity and consolidation.

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FAQ: HRA Under Old vs. New Regime

Has the basic HRA exemption formula changed?

No. The three-condition formula remains intact, though moved under Section 19(11) as a “special allowance.”

How is employer-provided accommodation taxed?

Under both regimes, it’s treated as a perquisite, with valuation based on fair rent minus any rent recovered.

Can I still claim HRA if I pay rent to my parent?

Yes, provided you have valid rent receipts and a formal lease agreement; landlord PAN if rent exceeds ₹1 lakh.

Does the new bill allow HRA on multiple properties?

No. Only one property can be claimed for HRA exemption; others fall under “income from house property.”

What’s the advantage of the new bill’s structure?

The New Tax Bill 2025 consolidates HRA rules into clearer sections—perquisites under Section 17 and special allowances under Section 19—reducing confusion and improving compliance.

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Conclusion

While the core principles of HRA calculation and exemption remain the same, the New Tax Bill 2025 brings greater clarity by categorizing HRA as a special allowance and refining perquisite rules. Taxpayers should watch for the detailed rules that will specify exact limits and valuation methods, ensuring they can continue to claim HRA effectively under the new regime.