Income tax

HRA: Bengaluru, Hyderabad, Pune and Ahmedabad now get the 50% limit

From tax year 2026-27, eight cities get the 50% HRA limit, up from four. How the exemption works and how much more tax-free HRA you could claim.

By Saifu team · 5 October 2026 · 1 min read

Try it: HRA exemption calculatorWork out the tax-free part of your house rent allowance under the old regime, with the 50% limit now covering Bengaluru, Hyderabad, Pune and Ahmedabad.

For decades only Delhi, Mumbai, Kolkata and Chennai counted as metros for house rent allowance. The Income-tax Rules, 2026, which came in with the new Income-tax Act on 1 April 2026, added Bengaluru, Hyderabad, Pune and Ahmedabad. If you rent in one of them and use the old tax regime, more of your HRA can be tax free.

The rule

The tax-free part of HRA is the lowest of three amounts:

the HRA you received;
rent paid minus 10% of salary;
50% of salary in the eight cities, 40% anywhere else.

Salary here means basic pay plus dearness allowance.

An example

Basic pay ₹60,000 a month, HRA ₹30,000, rent ₹35,000, in Bengaluru. For the year:

HRA received: ₹3,60,000.
Rent minus 10% of salary: ₹4,20,000 minus ₹72,000 = ₹3,48,000.
40% of salary (the old rule for Bengaluru): ₹2,88,000. 50% (the new rule): ₹3,60,000.

Under the old rule the exemption was ₹2,88,000. Now it is ₹3,48,000: ₹60,000 more tax free. At the 30% slab that is about ₹18,700 less tax with cess. Work out yours in the HRA calculator.

When it starts

From tax year 2026-27, April 2026 to March 2027. The return for 2025-26 that you filed in 2026 still used the four-city rule.

Only in the old regime

The new regime gives no HRA exemption. For many people the new regime still wins, so check both in the income tax calculator with your HRA figure included.

Paperwork

Keep rent receipts and a rent agreement.
If rent is above ₹1 lakh a year, give your employer your landlord's PAN.
The new rules also ask whether your landlord is a relative. Paying rent to parents is allowed if it is real and they declare it as income.

Sources: Mondaq: Income-tax Rules 2026 and HRA, TaxGuru: eight cities for 50% HRA, ClearTax: income tax changes from April 2026.

This is general information, not tax advice.

Rules, rates and limits change. Check the official source linked above before you rely on a figure here. Posts never contain referral or affiliate links from the writer.

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