With the start of the new financial year on April 1, 2026, salaried taxpayers have received good news. The government has made an important change in the rules related to House Rent Allowance (HRA).
Under the Income Tax Rules, 2026, issued by the Central Board of Direct Taxes (CBDT), more cities have been included where employees can claim HRA exemption of up to 50% of their basic salary.
More Cities Added to the 50% HRA List
Earlier, only four metro cities—Delhi, Mumbai, Kolkata, and Chennai—allowed employees to claim HRA exemption up to 50% of their basic salary. In all other cities, the limit was 40%.
Now, the government has added four more cities to this list: Bengaluru, Hyderabad, Pune, and Ahmedabad.
This means employees living in these eight cities can now claim HRA exemption up to 50% of their basic salary. As a result, their taxable income will reduce and their take-home salary will increase.
Why This Change Was Introduced
Experts believe this decision was necessary because house rents have increased sharply in many cities. In places like Bengaluru and Pune, rents are now almost equal to those in older metro cities.
This change will help reduce the gap between actual rent costs and tax benefits. It will also leave more money in the hands of the middle class and may increase demand for rental housing in cities.
Extra Benefits Under the Old Tax Regime
Along with HRA changes, the government has also increased some other benefits for taxpayers who choose the old tax regime:
Children’s education and hostel allowance: The exemption limit has been increased.
Free meals at the workplace: Relief has been provided on meal coupons or free food given by employers.
Foreign travel and studies: Tax Collected at Source (TCS) on expenses for foreign travel or education has been reduced.
Stricter Rules to Prevent Misuse
Even though relief has been given, the government has also made rules stricter.
Technology will now be used to closely check HRA claims and prevent fake rent receipts.
To reduce speculation in futures and options (F&O), the Securities Transaction Tax (STT) has been increased by 150%.