With the beginning of the new financial year on April 1, 2026, salaried taxpayers have received some good news.
The government has made major changes to the rules related to House Rent Allowance (HRA), increasing the number of cities where employees can claim HRA exemption of up to 50% of their basic salary.
This exemption has been introduced under the Income Tax Rules, 2026, notified by the Central Board of Direct Taxes (CBDT).
Metro City List Expanded from 4 to 8
Earlier, only employees living in four major metro cities — Delhi, Mumbai, Kolkata, and Chennai — were eligible to claim HRA tax exemption up to 50% of their basic salary. For employees living in other cities, the exemption limit was 40%.
Now, the government has added four more cities to this list — Bengaluru, Hyderabad, Pune, and Ahmedabad.
With this change, employees working in these eight cities can now claim HRA exemption up to 50% of their basic salary. This will help reduce their taxable income and also increase their take-home salary.
Why Was This Change Needed?
Experts believe this decision was necessary to match the current rental market situation. In cities like Bengaluru and Pune, house rents have increased sharply in the past few years and, in many cases, have reached levels similar to older metro cities.
According to experts, this move will leave more money in the hands of the middle class, which may also boost demand for rental housing in urban areas.
More Relief Under the Old Tax Regime
Apart from HRA, the government has also increased the limits of some other deductions for taxpayers choosing the old tax regime.
Children’s Education and Hostel:
The exemption limit for children’s education and hostel allowance has been increased.
Free Meal:
Relief has also been provided on meal coupons or free food given by the office.
Foreign Travel and Studies:
TCS on expenses related to foreign travel or studies will now be reduced.
Stricter Rules for Compliance and Speculation Control
Along with providing relief, the government has also tightened certain regulations.
Technology will now be used for stricter verification of HRA claims to prevent the use of fake rent receipts.
At the same time, to control speculation in futures and options (F&O), the Securities Transaction Tax (STT) has been increased by 150%.
