Claiming HRA In 2025? Avoid These 7 Common Mistakes

Claiming House Rent Allowance (HRA) is one of the easiest ways for salaried employees to save on taxes. But every year, thousands make small errors that lead to reduced exemptions - or worse, income tax notices. Whether you’re filing returns for FY 2024–25 or planning your salary structure, here are 7 common HRA mistakes you must avoid.

What is HRA and Who Can Claim It?

A quick refresher

• HRA is a salary component provided by employers to cover rent expenses.
• Tax benefits apply under Section 10(13A) of the Income Tax Act.
• HRA can only be claimed if you live in a rented house and pay rent.
• Exemption depends on salary, rent paid, city of residence, and other criteria.

You cannot claim HRA if you live in your own house or under the new tax regime where exemptions like HRA are not allowed.

7 Common HRA Mistakes to Avoid in 2025

1. Claiming HRA Without Rent Receipts

Many employees assume that rent receipts are not required, especially if the employer hasn't asked for them. But when you file your income tax return, you may be asked to provide proof.

What to do:

• Always collect rent receipts monthly or quarterly.
• Include landlord name, rent amount, period, and address.
• Add a revenue stamp if paying in cash (not advisable).

2. Ignoring the PAN Requirement for Rent Above ₹1 Lakh/Year

If your annual rent exceeds ₹1,00,000, it is mandatory to provide your landlord’s PAN. Without it, your HRA claim may be rejected.

If landlord refuses PAN: Submit a declaration stating the reason and try to ensure digital proof of rent paid via bank transfer.

3. Mismatch Between HRA in Salary and ITR Claim

It’s common to forget to declare HRA to your employer and then attempt to claim it directly while filing your income tax return. This mismatch can trigger an IT notice or reduce your eligible exemption.

Fix:

• Always declare rent at the start of the financial year using your company’s HRA declaration format.
• If missed, still claim during ITR filing, but keep supporting documents ready.

4. Paying Rent to Parents or Relatives - Without Proper Proof

You can legally pay rent to your parents and claim HRA. But the rent must actually be paid - preferably through bank transfer - and backed by rent receipts and a simple rent agreement.

Avoid:

• Cash payments
• No written agreement
• Missing rent trail in bank records

5. Choosing the Wrong Tax Regime

Under the new tax regime, you are not allowed to claim HRA exemption. Yet many people opt for it to reduce TDS and later realize they lost out on deductions.

Tip: Use an HRA calculator to compare both regimes. If your rent is high and you have other deductions (like 80C, 80D), the old regime may offer better tax savings.

6. Claiming HRA and Home Loan Benefits for the Same Location

You can claim both HRA and home loan interest (Section 24) only if you live in a rented house due to work reasons, even if you own a house in the same city.

Key point:

• Document why you’re not staying in your own house (e.g., too far from workplace).
• Ensure both addresses are consistent in your ITR and rent documents.

7. Not Keeping Proper Documentation for IT Scrutiny

If your ITR is picked up for scrutiny, the Income Tax Department can ask for:

• Rent receipts
• PAN of landlord
• Rent agreement
• Bank proof of rent paid

Pro tip: Maintain a dedicated folder with all documents. Start collecting from April instead of waiting till March.

Documents You Need to Claim HRA in FY 2024–25

• Monthly/quarterly rent receipts
• Rent agreement with landlord
• PAN of landlord if rent > ₹1L/year
• Bank statement showing rent transfer
• Employer’s HRA declaration form (during payroll structuring)

Old vs New Tax Regime - What Works Better?

Example: Ajay earns ₹12L annually and pays ₹20,000 rent in Mumbai. He also invests ₹1.5L in 80C. Old regime saves him more tax than the new one in this case.

Final Tips to Maximize HRA Benefits

• Declare rent to employer early in the year
• Avoid paying rent in cash
• Keep digital rent receipts and agreements
• Use a calculator to decide the best tax regime
• Don't mix HRA claims with fake rent receipts or unsupported documentation

Want to check which tax regime gives you better benefits based on your HRA and salary?

Talk to a financial expert before you file.

Glossary

• HRA – House Rent Allowance, a part of your salary exempt from tax if you live in a rented home
• Section 10(13A) – Income Tax section that governs HRA exemption rules
• PAN – Permanent Account Number; required if rent > ₹1,00,000 annually
• Form 16 – Certificate of TDS issued by your employer
• New Tax Regime – Optional tax system with lower rates but no deductions like HRA, 80C, etc.
• Section 80GG – Tax deduction for rent paid if HRA is not part of your salary

To further optimise your deductions and plan better, check out our guide on smart tax planning strategies in India.

Disclaimer: This article is for educational purposes only and does not constitute professional tax advice. Please consult a qualified tax advisor before making HRA-related claims in your ITR.