HRA Exemption: 50% Limit Now for 8 Cities — Bengaluru, Hyderabad, Pune, Ahmedabad Added

In short: from 1 April 2026 (tax year 2026-27), salaried people living in Bengaluru, Hyderabad, Pune and Ahmedabad can claim HRA exemption of up to 50% of basic + DA, the same as Delhi, Mumbai, Kolkata and Chennai. Before this, those four cities were treated as non-metros at 40%. The change comes from Rule 279 of the Income-tax Rules, 2026.

The 8 cities with the 50% limit

Delhi · Mumbai · Kolkata · Chennai · Bengaluru · Hyderabad · Pune · Ahmedabad. All other cities and towns stay at 40%.

How HRA exemption is worked out

The exempt HRA is the least of these three amounts for the year:

1. Actual HRA received.
2. Rent paid minus 10% of basic + DA.
3. 50% of basic + DA (8 cities) or 40% (elsewhere).

Worked example (Bengaluru)

Basic + DA ₹50,000 a month, HRA received ₹30,000, rent paid ₹40,000 — for 12 months:

That is ₹60,000 more exempt income for the year. Try your own numbers in the HRA exemption calculator — it already includes the 8-city list.

Important points

• HRA exemption is available only under the old tax regime. In the default new regime the full HRA is taxable — compare both in the income tax calculator.
• If annual rent is more than ₹1,00,000, your employer needs your landlord’s PAN. Make monthly receipts with the rent receipt generator.
• Give your employer your city and rent proof early so that TDS is calculated correctly.

Sources

• TaxGuru — HRA exemption: 8 cities now qualify for 50%
• Angel One — Income Tax Rules 2026 and the four new cities

Updated 2 October 2026. General information, not tax advice.