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Taxpayers in these cities may soon get 50% HRA exemption
09 Feb 2026

The Indian government is considering expanding the list of cities eligible for a 50% House Rent Allowance (HRA) exemption under the old tax regime.

The proposal seeks to include Ahmedabad, Bengaluru, Hyderabad, and Pune in the existing list of Chennai, Delhi, Kolkata, and Mumbai.

The move is aimed at providing relief from rising rental costs in major economic hubs across India.

Proposed changes to HRA exemption
Exemption details

Currently, taxpayers in major metros such as Chennai, Delhi, Kolkata, and Mumbai are eligible for a 50% HRA exemption. Other urban centers get a 40% exemption.

The proposed change would extend this benefit to Ahmedabad, Bengaluru, Hyderabad, and Pune while keeping the rest of the cities at 40%.

This is part of a larger effort by the government to modernize HRA provisions in line with changing demographics and rising rental prices in economic hubs.

Exemption under old and new tax regimes
Tax regime

The HRA exemption is only available to taxpayers filing taxes under the old tax regime. The new tax regime does not offer most exemptions, including HRA.

Once the proposed changes are implemented, taxpayers living in the above mentioned cities will be eligible for a 50% HRA exemption under the old tax regime.

A look at draft Income Tax Rules, 2026
Implementation

The proposed changes are part of the draft Income Tax Rules, 2026, which were made available to stakeholders on Saturday. If approved, these proposals will come into effect from April 1, 2026.