The government has introduced new rules under the Income Tax Rules, 2026, bringing major changes to House Rent Allowance (HRA).
From April 1, 2026, more people can now claim higher tax benefits on rent.
At the same time, the government has added stricter rules to prevent misuse.
More Cities Get Higher HRA Benefits
Earlier, only four metro cities qualified for higher HRA exemption:
Delhi
Mumbai
Kolkata
Chennai
Now, four more cities have been added:
Bengaluru
Hyderabad
Pune
Ahmedabad
This means people living in these cities can now claim higher tax deductions on rent, just like metro cities.
HRA Exemption Increased to 50%
With the new rules:
Employees in these 8 cities can claim up to 50% of their salary as HRA exemption
Earlier, the newly added cities had a limit of just 40%
This is a big benefit, especially in cities like Bengaluru and Pune where rents are already very high.
New Rule: Declare Landlord Details
Along with higher benefits, the government has introduced stricter compliance rules.
Now, taxpayers must:
Disclose their relationship with the landlord
Especially important if rent is paid to family members
A new reporting format has also been introduced for this purpose.
This step is meant to stop fake HRA claims and improve transparency.
Important: Old Tax Regime Only
There’s one important condition:
HRA benefits are available only under the old tax regime
If you choose the new tax regime, you cannot claim HRA exemption
So, employees may need to compare both tax regimes before deciding.
What This Means for You
For salaried employees, especially in newly added cities, this change brings clear benefits:
Higher tax savings
Lower taxable income
Better take-home salary
But there’s also more responsibility:
Keep proper rent receipts
Ensure correct disclosures
Avoid mistakes to prevent scrutiny
Bigger Picture: More Benefits, More Accountability
The new HRA rules follow a simple approach:
Give more tax benefits to match real living costs
Ensure strict compliance to avoid misuse
As cities grow and rents rise, these changes make the tax system more practical — while keeping it fair for everyone.
