Written by Sid Joshi
Founder, WorthCheck.in
HRA Exemption 2026: 8 Metro Cities Now Get 50% Benefit
Big news for Bengaluru, Pune, Hyderabad, and Ahmedabad employees! From April 1, 2026, you qualify for 50% HRA exemption â same as Delhi and Mumbai. Here's everything you need to know about the new rules.
Key Takeaways
- â8 metro cities now get 50% HRA exemption (was 4 cities earlier)
- âNew cities added: Bengaluru, Pune, Hyderabad, Ahmedabad (from April 2026)
- âOnly in old regime â HRA exemption not available in new tax regime
- âLandlord PAN mandatory if annual rent exceeds âš1 lakh
- âTax savings: Up to âš18,000+ per year for employees in new metro cities
If you work in Bengaluru, Pune, Hyderabad, or Ahmedabad and pay rent, I have some excellent news. The CBDT notification dated March 20, 2026 has added these four cities to the "metro" category for HRA calculations. This means your HRA exemption limit just got a 25% boost.
Previously, only employees in Delhi, Mumbai, Chennai, and Kolkata could claim up to 50% of their basic salary as HRA exemption. Everyone else was limited to 40%. Now, 8 cities qualify for the higher 50% limit.
The 8 Metro Cities for 50% HRA Exemption
Delhi
Mumbai
Chennai
Kolkata
Bengaluru
NEW 2026Pune
NEW 2026Hyderabad
NEW 2026Ahmedabad
NEW 2026What This Means for You
If you work in Bengaluru, Pune, Hyderabad, or Ahmedabad, your HRA exemption limit increases from 40% to 50% of basic salary. The actual benefit depends on your rent and which of the three limits is lowest for you.
What is HRA? A Quick Refresher
House Rent Allowance (HRA) is a salary component that employers pay to help cover your rental expenses. The tax exemption on HRA is governed by Section 10(13A) of the Income Tax Act.
HRA is Part of Your Salary
It's not an extra benefit â HRA is already included in your CTC. The exemption just makes part of it tax-free.
You Must Actually Pay Rent
No rent payment = no exemption. You can't claim HRA if you live in your own house or rent-free accommodation.
Old Regime Only
HRA exemption is NOT available in the new tax regime. You must choose the old regime to claim this benefit.
HRA Exemption Calculation Formula
The exempt HRA is the minimum of these three amounts:
Actual HRA Received
The HRA component from your salary slip
Rent Paid â 10% of Basic Salary
Actual rent minus 10% of (Basic + DA)
50% or 40% of Basic Salary
50% for 8 metro cities | 40% for all other cities
What Counts as "Salary"?
For HRA calculation, salary means:
- Basic Pay
- Dearness Allowance (DA), if applicable
- Commission as % of turnover (if any)
Note: Special allowance, conveyance, etc. are NOT included.
Quick HRA Calculator
Calculation Breakdown
HRA Exemption
âš19,000/mo
âš2,28,000/year
Taxable HRA
âš11,000/mo
âš1,32,000/year
Real Examples: Before vs After
Example: Manager in Hyderabad
â Old Rule (40%)
Limit 3: âš80K Ã 40% = âš32,000
Exemption: âš32,000/mo
â New Rule (50%)
Limit 3: âš80K Ã 50% = âš40,000
Exemption: âš37,000/mo
Extra Savings: âš5,000/mo = âš60,000/year = ~âš18,720 tax saved
Documents Required for HRA Claims
New 2026 Compliance Rules
Missing documentation can lead to complete disallowance of your HRA claim. From 2026, you must also disclose your relationship with the landlord.
đ Always Required
- âRent Receipts â Monthly/quarterly, signed by landlord
- âRent Agreement â Valid lease deed
- âForm 12BB â Declaration to employer
- âBank Statements â Showing rent payments
đ If Rent > âš1 Lakh/Year
- â Landlord PAN â Mandatory
- â Landlord Relationship â Disclose if relative
- â Property Address â Complete address required
Paying Rent to Parents?
Yes, you can! Just ensure: (1) Valid rent agreement, (2) Bank transfers (not cash), (3) Parents declare rental income in their ITR, (4) Disclose relationship to employer.
HRA and Tax Regime Choice
â ī¸ HRA Exemption is NOT Available in New Tax Regime
If you're in the new regime (default from FY 2023-24), your entire HRA is taxable. You must opt for the old regime to claim HRA.
| Feature | Old Regime | New Regime |
|---|---|---|
| HRA Exemption | Available â | Not Available â |
| 80C Deduction | Up to âš1.5L | Not Available |
| Standard Deduction | âš50,000 | âš75,000 |
| Best For | High rent payers | No deductions to claim |
Frequently Asked Questions
Which 8 cities get 50% HRA exemption?âŧ
Can I claim HRA in the new tax regime?âŧ
Is landlord PAN mandatory?âŧ
Can I pay rent to parents and claim HRA?âŧ
When do the new 8-city rules apply?âŧ
Can I claim both HRA and home loan interest?âŧ
Bottom Line
- âIf you're in Bengaluru/Pune/Hyderabad/Ahmedabad, you now get the 50% HRA limit
- âThis only helps if you're in the old tax regime â new regime has no HRA exemption
- âKeep your documentation ready: rent receipts, agreement, landlord PAN
- âUse our calculator to see your exact savings
Sid Joshi
Founder, WorthCheck.in
Building tools to help Indians make better financial decisions. Previously worked in fintech for 8+ years.