Good news for employed people! In-hand salary of people living in these cities can increase, government can give tax exemption on HRA

HRA Tax New Rules: The government may soon announce relief for employees working in major cities of the country. The Central Government is planning to change the rules of tax exemption on House Rent Allowance (HRA).

Keeping in mind the ever increasing house rents, the government can change the rules. Under the Draft Income Tax Rules 2026, it has been proposed that some new cities should also be included in the ambit of higher HRA exemption. Till now this facility is limited to only four metro cities Mumbai, Delhi, Kolkata and Chennai…

Which cities are proposed to be connected?

The government’s proposal calls for adding Bengaluru, Hyderabad, Pune and Ahmedabad among the cities with 50 percent relaxation. Currently, 40 percent discount is available in these cities as per the old fixed limit.

How will the employees benefit from the proposal?

Under current income tax rules, three different figures are compared to decide tax exemption on HRA. The discount is available only on the one which is lowest among these. One of these is the actual HRA received by the employee. On the other hand, for those working in metro cities, the basic salary and DA is 50 percent (40 percent in other cities). Thirdly, it is the amount left after deducting 10 percent of basic salary and DA from the fare paid.

If these proposed rules are implemented, then those working in big cities like Bengaluru, Hyderabad, Pune and Ahmedabad will also get the benefit of more tax exemption. With this, these cities will come in the category of metros like Mumbai, Delhi, Kolkata and Chennai in terms of HRA.

Discussion on draft ongoing, decision yet to be taken

At present the government has presented this proposal in draft form. A final decision on this will be taken only after receiving suggestions and objections from all parties. If the rules are implemented, employed people living in expensive cities are expected to get significant tax relief.

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