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House Rent Allowance (HRA) Image Credit source: ai generated

A very good news is coming for the working people. If you work in metro cities and spend a large part of your salary on house rent, then the government is preparing to give you big relief on the tax front. Till now, the benefit of higher tax exemption on House Rent Allowance (HRA) was limited to only four major metros, but now it has been proposed to expand this scope. This step is no less than a gift for those lakhs of employees who are trying to increase their savings amid rising rents and inflation.

What is the government's new proposal?

According to the rules till now, if you live in Mumbai, Delhi, Kolkata or Chennai, you are allowed to claim HRA up to 50% of your salary under the old tax regime. At the same time, for employees living in other cities, this limit is 40%. But now the situation is about to change.

The government has decided to add four more big cities to this list. According to the proposal, now employees living in Bengaluru, Hyderabad, Pune and Ahmedabad will also be able to get the benefit of 50% HRA exemption. This means that now these cities will also be given the same status as 'Metro' category. If this rule is implemented, then people living in a total of 8 cities will be entitled to 50% discount, while in the rest of India this limit will remain only 40%.

Why was there a need for change?

The biggest reason for this change is the changing picture of these cities. In the last decade, cities like Bengaluru, Hyderabad and Pune had become 'non-metro' only in name, whereas in reality the expenses and living conditions here are no less than any metropolitan city.

These cities have now become major technology, manufacturing and service hubs of the country. With the increase in employment opportunities, rents in residential areas have started skyrocketing. In such a situation, the old limit of 40% was proving inadequate for the employees living in these cities. This step of the government is like accepting the changes in urban demographics and the ground reality of these cities becoming economic hubs.

How much will be the impact on tax saving?

The savings will be greatest for those who still choose the old tax regime. Exemptions like HRA are not available in the new tax regime, hence it will not have any impact there. But if you are in the old regime, then coming in the 40% to 50% slab simply means that your taxable income will reduce and more money will be left in your pocket.