The government has introduced the new Income Tax Rules, 2026, which will come into effect from April 1, 2026.
The main aim of these rules is to make tax filing easier and improve compliance by simplifying existing rules.
One of the key changes is related to House Rent Allowance (HRA).
The government has made HRA tax exemptions more clear and transparent for taxpayers.
However, there is an important point to note.
HRA tax exemption is only available if you choose the old tax regime.
If you opt for the new tax regime, you will not get this benefit.
Who Can Claim HRA Tax Exemption?
To claim HRA exemption, you must meet a few conditions:
You must be living in a rented house
The house should not be in your name or your spouse’s name
HRA must be a part of your salary structure
If these conditions are not met, you cannot claim the exemption.
How HRA Exemption is Calculated
HRA tax exemption is calculated based on three factors.
The lowest of these three will be considered for tax benefit:
Actual HRA received from your employer
40% or 50% of your basic salary (depending on your city)
Rent paid minus 10% of your basic salary and dearness allowance
This means your final tax exemption depends on whichever amount is the smallest among these three.
Big Relief: More Cities Get 50% HRA Benefit
Earlier, only four metro cities—Delhi, Mumbai, Kolkata, and Chennai—were eligible for 50% HRA exemption on basic salary.
In all other cities, the limit was 40%.
Now, from April 1, 2026, the government has expanded this list.
Four more cities have been added:
Bengaluru
Pune
Hyderabad
Ahmedabad
This means people living in these cities can now claim up to 50% of their basic salary as HRA exemption.
What This Means for You
This change is a big relief, especially for people living in expensive cities.
With more cities now included in the 50% category, many taxpayers can save more on taxes.
At the same time, the 40% limit will continue to apply to all other cities.
