With hybrid work becoming the norm, many employees now maintain rented homes in two different cities—one near their workplace and another in their hometown. This has raised a common tax question: can salaried individuals claim House Rent Allowance (HRA) exemption for rent paid on both houses? Tax experts say the answer depends on how tax rules define eligible rent claims.
House Rent Allowance is a salary component that helps reduce tax liability for employees who live in rented accommodation. The benefit is available only under India’s old tax regime and is governed by provisions under Section 10(13A) of the Income Tax Act.
The rule states that HRA exemption can be claimed only for the house actually used for residential purposes. This means the tax benefit applies to the rent paid for the property where the employee lives—not for multiple residences simultaneously.
The shift toward work-from-home and hybrid work policies has changed how employees manage housing. Many professionals live in their hometowns for part of the month while maintaining a rental property in another city where their office is located.
For example, an employee based in Gujarat whose office is in Bengaluru may stay in Bengaluru for office days and return home during remote work days. In such situations, the employee effectively pays rent for two properties. Despite this, tax rules allow HRA exemption for only one of them.
Tax specialists clarify that an employee can choose either residence for HRA purposes—the hometown rental or the city-of-work rental—but cannot claim both simultaneously.
The exempt portion of HRA is determined as the lowest of the following three values:
Rent paid minus 10% of basic salary
50% of basic salary (for metro cities) or 40% (for non-metros)
Actual HRA received from the employer
Whichever amount is lowest becomes the tax-free portion, while the remaining HRA is added to taxable income.
Interestingly, tax law does not require the rented house to be located in the same city as the employer’s office. This means an employee can legally claim HRA for a rented home in their hometown—even if their office is in another city—provided they genuinely live there and pay rent.
This provision has become particularly relevant since remote work gained popularity after the pandemic, allowing professionals to relocate away from corporate hubs.
If an employee owns additional properties purchased through home loans, tax treatment differs from HRA rules. Interest paid on home loans for rented properties can generally be claimed as a deduction under the “Income from House Property” category.
However, there is a cap. Under the old tax regime, a taxpayer can set off a maximum loss of ₹2 lakh per financial year from house property against other income sources. If losses exceed this limit, the remaining amount can be carried forward for up to eight assessment years and adjusted against future house property income.
Under the new tax regime, however, such set-off and carry-forward benefits are restricted. Taxpayers opting for the new system cannot offset house property losses against other income heads, which significantly reduces tax-saving opportunities. Additionally, deductions for interest on self-occupied property are generally not allowed in the new regime.
HRA can be claimed for only one rented home at a time.
The chosen property does not have to be in the same city as the office.
Hybrid workers must select the residence that offers the highest tax benefit.
Home loan interest deductions may be claimed separately, subject to limits.
Tax treatment differs significantly between old and new tax regimes.
While hybrid work has changed living arrangements, tax laws have not fully adapted to multiple-rental lifestyles. Employees paying rent for two homes must carefully choose which property to claim under HRA to maximize savings. Reviewing salary structure, rent payments, and tax regime selection can help determine the most beneficial option.
Before filing returns, financial experts recommend calculating exemptions under both tax regimes and consulting a professional if needed. A small planning step today could translate into significant tax savings at the end of the financial year.
