{"id":720,"date":"2026-07-31T20:28:16","date_gmt":"2026-07-31T14:58:16","guid":{"rendered":"https:\/\/www.taxaj.com/learn\/hra-50-exemption-four-new-cities-rules-2026\/"},"modified":"2026-08-18T20:56:36","modified_gmt":"2026-08-18T15:26:36","slug":"hra-50-exemption-four-new-cities-rules-2026","status":"publish","type":"post","link":"https:\/\/www.taxaj.com/learn\/hra-50-exemption-four-new-cities-rules-2026\/","title":{"rendered":"HRA 50% exemption extended to four new cities under Rules 2026 \u2014 full list"},"content":{"rendered":"<ul>\n<li>HRA 50% Exemption Extended to Four New Cities Under Rules 2026<\/li>\n<\/ul>\n<p>&gt; Quick update: From 1 April 2026, Bengaluru, Pune, Hyderabad and Ahmedabad qualify for the higher 50% HRA salary ceiling\u2014a benefit earlier limited to Delhi, Mumbai, Chennai and Kolkata.<\/p>\n<p>For salaried employees paying rent, House Rent Allowance (HRA) can make a meaningful difference to taxable income. Under the Income-tax Rules, 2026, four high-rent cities have been added to the list of locations eligible for the higher 50% HRA exemption ceiling.<\/p>\n<p>The change is especially relevant for employees under the old tax regime who receive HRA as part of their salary and live in rented accommodation.<\/p>\n<h2>\u2728 What has changed?<\/h2>\n<p>Until 31 March 2026, the 50% ceiling applied only to four cities: Delhi, Mumbai, Chennai and Kolkata. Employees in other cities generally used the 40% ceiling in the HRA calculation.<\/p>\n<p>From 1 April 2026, the higher ceiling extends to four more cities:<\/p>\n<p>| \ud83c\udfd9\ufe0f Newly added cities | HRA ceiling from 1 April 2026 |<\/p>\n<p>|&#8212;|&#8212;:|<\/p>\n<p>| Bengaluru | 50% of eligible salary |<\/p>\n<p>| Pune | 50% of eligible salary |<\/p>\n<p>| Hyderabad | 50% of eligible salary |<\/p>\n<p>| Ahmedabad | 50% of eligible salary |<\/p>\n<h2>\ud83d\udccd Full list: Cities eligible for the 50% HRA ceiling<\/h2>\n<p>| Category | Cities |<\/p>\n<p>|&#8212;|&#8212;|<\/p>\n<p>| Existing eligible cities | Delhi, Mumbai, Chennai, Kolkata |<\/p>\n<p>| Newly added in 2026 | Bengaluru, Pune, Hyderabad, Ahmedabad |<\/p>\n<p>| Total | 8 cities |<\/p>\n<p>Employees residing in cities other than these eight ordinarily continue with the 40% of eligible salary ceiling for HRA calculations.<\/p>\n<p>&gt; Important: This is not a flat 50% tax exemption. The final exempt HRA amount is the lowest of the amounts prescribed under the HRA formula.<\/p>\n<h2>\ud83e\uddee How is HRA exemption calculated?<\/h2>\n<p>For an eligible salaried employee, the exempt portion of HRA is the lowest of:<\/p>\n<p>1. Actual HRA received;<\/p>\n<h2>Rent paid minus 10% of eligible salary; or<\/h2>\n<p>3. 50% of eligible salary for the eight listed cities, or 40% for other cities.<\/p>\n<p>In general, eligible salary includes basic salary and applicable dearness allowance. The precise calculation can vary based on the structure of an employee\u2019s compensation.<\/p>\n<h3>Simple illustration<\/h3>\n<p>Assume an employee living in Bengaluru has:<\/p>\n<p>| Particular | Annual amount |<\/p>\n<p>|&#8212;|&#8212;:|<\/p>\n<p>| Eligible salary | \u20b912,00,000 |<\/p>\n<p>| HRA received | \u20b95,40,000 |<\/p>\n<p>| Annual rent paid | \u20b94,80,000 |<\/p>\n<p>The calculation would be:<\/p>\n<ul>\n<li>Actual HRA received: \u20b95,40,000<\/li>\n<li>Rent paid less 10% of salary: \u20b94,80,000 \u2212 \u20b91,20,000 = \u20b93,60,000<\/li>\n<li>50% of eligible salary: \u20b96,00,000<\/li>\n<li>HRA exemption available: \u20b93,60,000, being the lowest of the three amounts.<\/li>\n<\/ul>\n<p>The 50% ceiling matters when it is the limiting component in the calculation. It does not automatically make half of a person\u2019s salary tax-free.<\/p>\n<h2>\ud83d\udc64 Who can benefit from the new HRA city list?<\/h2>\n<p>The higher ceiling can benefit you if all or most of the following apply:<\/p>\n<ul>\n<li>You are a salaried employee;<\/li>\n<li>Your salary includes an HRA component;<\/li>\n<li>You live in rented accommodation;<\/li>\n<li>Your place of residence is Bengaluru, Pune, Hyderabad or Ahmedabad;<\/li>\n<li>You opt for the old tax regime; and<\/li>\n<li>Your rent and HRA levels make the 40% versus 50% ceiling relevant to your calculation.<\/li>\n<\/ul>\n<p>Employees using the new tax regime generally cannot claim the usual HRA exemption. Before choosing a regime, compare the tax payable under both options based on your salary, HRA, rent, deductions and other exemptions.<\/p>\n<h2>\ud83d\udcc4 Documents to keep ready<\/h2>\n<p>A compliant HRA claim should be supported by genuine records. Keep:<\/p>\n<ul>\n<li>Rent agreement;<\/li>\n<li>Monthly rent receipts;<\/li>\n<li>Payment proof, such as bank transfers;<\/li>\n<li>Landlord\u2019s name and address;<\/li>\n<li>Landlord\u2019s PAN where required by your employer\u2019s payroll process; and<\/li>\n<li>Details of any relationship with the landlord, where applicable.<\/li>\n<\/ul>\n<p>Claiming HRA without actually paying rent, or using unsupported rent receipts, may create tax and compliance risks.<\/p>\n<h2>\u2705 What should employees do now?<\/h2>\n<p>If you live in one of the four newly included cities:<\/p>\n<p>1. Check whether your employer has updated its payroll and HRA declaration process.<\/p>\n<p>2. Submit accurate rent details and supporting documents.<\/p>\n<p>3. Compare the old and new tax regimes before making your annual tax declaration.<\/p>\n<p>4. Keep rent-payment evidence throughout the financial year\u2014not only at the time of filing your return.<\/p>\n<h2>Bottom line<\/h2>\n<p>The 2026 change expands the 50% HRA salary ceiling to eight cities: Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Pune, Hyderabad and Ahmedabad. It may reduce taxable salary for eligible renters under the old tax regime, but the benefit depends on the full HRA formula and individual salary structure.<\/p>\n<p>This article is for general information only and is not tax advice. Consult a chartered accountant or tax professional for advice based on your individual circumstances.<\/p>\n<ul>\n<li>Stay Connected &amp; Learn More<\/li>\n<li>Join our WhatsApp Channel for daily insights on payroll, accounting &amp; compliance:<\/li>\n<li>https:\/\/whatsapp.com\/channel\/0029VaAOrtiFCCoQlhtGIx2o<\/li>\n<li>Explore more informational content on our YouTube Channel:<\/li>\n<li>https:\/\/www.youtube.com\/@taxajca<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>HRA 50% exemption now covers eight cities from April 2026. See the full list, eligibility rules, formula and how much you may save.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[5],"tags":[191,188,185,186,190,192,187,189],"class_list":["post-720","post","type-post","status-publish","format-standard","hentry","category-income-tax","tag-ahmedabad-hra","tag-bengaluru-hra","tag-hra-exemption-2026","tag-hra-new-cities","tag-hyderabad-hra","tag-income-tax-rules-2026","tag-old-tax-regime","tag-pune-hra"],"_links":{"self":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/720","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/comments?post=720"}],"version-history":[{"count":5,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/720\/revisions"}],"predecessor-version":[{"id":1568,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/720\/revisions\/1568"}],"wp:attachment":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/media?parent=720"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/categories?post=720"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/tags?post=720"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}