HRA Exemption Rules: Now, a 50% HRA claim will be available in these 4 new cities as well, directly boosting your 'in-hand' salary..

Effective April 1, 2026, the Central Board of Direct Taxes (CBDT) has significantly expanded the scope of tax exemptions available on House Rent Allowance (HRA) by introducing key amendments to the ‘Income Tax Rules, 2026’. The benefit, which was previously restricted to just four metropolitan cities, has now been extended to cover eight cities. This implies that your taxable income will decrease, resulting in a substantial boost to your monthly ‘take-home’ salary.

**Now, a 50% Claim is Available in These 4 Additional Cities**
For decades, the prevailing rule stipulated that only employees residing in traditional metropolitan centers—such as Delhi, Mumbai, Kolkata, and Chennai—were eligible to claim 50 percent of their basic salary as an HRA exemption. For the rest of the country, this limit was capped at a mere 40 percent. However, ground realities have evolved. Taking this into account, the government has now inducted Bengaluru, Hyderabad, Pune, and Ahmedabad into this exclusive ‘50 percent club.’ Indeed, house rents in these newly added cities have skyrocketed over the past few years. Given their status as major IT hubs and key commercial centers, rental costs in these cities have now reached parity with those of the traditional metropolitan areas. This historic decision is expected to play a pivotal role in bridging the gap between the rising burden of rental costs and the outdated tax regulations.

**Reduced Tax Burden**
When you can claim half of your basic salary as an expense towards rent, your total taxable income will witness a significant decline. A lighter tax burden means you will have more disposable cash in hand for your expenses. Economic experts concur that this additional financial cushion will empower the middle class to better cope with the rising cost of living (inflation). Furthermore, as people's purchasing power increases, the rental housing market across the urban areas of these eight cities is expected to receive a fresh impetus.

**A ‘Double Bonanza’ for Those Opting for the Old Tax Regime**
The government has not limited its benevolence solely to HRA. If you file your Income Tax Return under the Old Tax Regime, several additional avenues for relief have been opened up for you. With a view to addressing expenses related to children's future, the limits for tax exemptions on education and hostel allowances have been increased. Furthermore, tax concessions have also been extended to benefits provided by employers to their employees, such as food coupons or free meals. There is also good news for parents planning to educate their children abroad or those intending to travel overseas. The rate of Tax Collected at Source (TCS) applicable to such expenses has been reduced, which will help ease the financial burden on your international travel budget.

**Thorough Scrutiny of HRA Claims**
While the government has granted various exemptions to taxpayers on one hand, it has simultaneously tightened the enforcement of compliance regulations on the other. Now, utilizing advanced technology, Housing Rent Allowance (HRA) claims will be subjected to scrutiny at a highly granular level. The primary objective of this measure is to crack down on individuals who resort to using fraudulent or forged rent agreements and receipts to evade taxes.

Disclaimer: This content has been sourced and edited from TV9. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.