🏠 HRA EXEMPTION – WHAT CHANGED FROM 2026 & HOW IT BENEFITS SALARIED TAXPAYERS

 What is HRA?

House Rent Allowance (HRA) is a salary component paid by employers to employees who live in rented accommodation. It helps reduce taxable income under the old tax regime.

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✅ Legal Provision
HRA exemption is governed by Section 10(13A) of the Income-tax Act read with Rule 2A.

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📊 How HRA Exemption is Calculated
The exempt amount is the least of:

• Actual HRA received
• Rent paid minus 10% of salary
• Prescribed % of salary
 – 50% for metro cities
 – 40% for non-metro cities

(Salary = Basic + DA forming part of retirement benefits)

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🔄 Key Change under Income-tax Rules 2026
Additional major cities are now treated on par with metros for HRA purposes.

➡ Earlier: Only Delhi, Mumbai, Chennai, Kolkata qualified for 50% limit
➡ Now added: Bengaluru, Hyderabad, Pune, Ahmedabad

This increases the eligible exemption ceiling for salaried employees residing in these cities.

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⚖ Old vs New Tax Regime
✔ Old regime → HRA exemption available
✖ New regime → HRA exemption not available

Employees must opt for the regime that gives better net tax efficiency.

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💡 How This Helps Taxpayers
• Higher exemption for urban renters
• Reduced taxable salary
• Better take-home pay under the old regime
• Reflects rising urban housing costs

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📌 Bottom Line
If you live in the newly classified cities and claim HRA under the old regime, your exemption potential increases — translating into tangible tax savings.

For salary structuring or tax planning, evaluate regime choice carefully.