HRA Exemption Expands: More Cities Benefit from April 2026

• Government expands House Rent Allowance (HRA) benefits, effective April 2026, under new Income-tax Rules, 2026.
• The higher HRA exemption cap of 50% of basic salary now includes Hyderabad, Pune, Ahmedabad, and Bengaluru, in addition to Mumbai, Delhi, Chennai, and Kolkata.
• This change aligns tax treatment with rising rental costs in major urban centers, offering tax relief to salaried taxpayers.
• Experts note the revision addresses the mismatch between rent realities and tax rules, potentially improving disposable incomes.
• The new rules also include other tax framework changes, such as enhanced deduction limits for the old tax regime and adjustments to STT on futures and options.

Key Questions Answered

Which new cities qualify for higher HRA exemption?

Bengaluru, Pune, Hyderabad, and Ahmedabad now qualify for higher HRA exemption.

How will this HRA change affect my take-home pay?

The change in House Rent Allowance (HRA) rules from April 1, 2026, can potentially increase take-home pay for salaried employees by allowing a higher tax-exempt portion of their HRA.

Will other tax deductions also see changes soon?

Yes, changes to tax deductions are occurring as part of the new Income Tax Act of 2025, effective April 1, 2026.