HRA income tax rules directly impact how much tax salaried professionals pay every year. According to the latest tax news, the Draft Income Tax Rules 2026 bring a major relief. The government now classifies Bengaluru, Pune, Hyderabad, and Ahmedabad as metro cities for tax purposes. This shift allows you to claim a much higher tax exemption, significantly increasing your take-home pay under the old tax regime. However, calculating HRA alongside professional tax deductions can be complex for many. To ensure you are maximizing every benefit, speaking with a professional tax consultant is highly recommended to navigate these new regulations accurately.
Actually, for decades, only four cities enjoyed the 50% HRA benefit. However, the new hra income tax rules under Rule 279 have officially expanded this list. Starting from the 2026-27 assessment year, residents of these new metros can claim up to 50% of their basic salary. In fact, this is one of the most practical updates to the income tax rules in recent history.
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The New “Metro” Classification: 40% vs 50% HRA Limit
To see the actual impact, you should use an income tax calculator. Previously, the law capped HRA exemption at 40% for cities like Bengaluru and Hyderabad. The government viewed these tech hubs as “non-metros” despite their high rents. Moreover, the new draft rules promote these four industrial centers to the 50% bracket. This change slashes your taxable income and provides better tax benefits to employees.
The table below shows the updated city categories under the new income tax guidelines:
If you live in Noida or Gurugram, the 40% rule still applies. Keep this in mind when you prepare to file your income tax return. While your personal allowance remains the same, this HRA shift can save you thousands. Actually, it redefines the financial landscape for urban renters across India.
How to Maximize Your Tax Savings in 2026
Don’t wait for the tax return file deadline to plan your finances. You should update your investment declarations with your HR department immediately. Remember, these advantages only apply to the Old Tax Regime. Since the New Tax Regime excludes HRA tax exemption, choosing the right path is vital for a higher income tax refund. Use a tax benefit calculator to compare both regimes for your salary.
In fact, many taxpayers find the old regime more attractive now. Whether you use a tax solver app or the official income tax return application, ensure you factor in your actual rent. You can also use a taxable income and tax calculator to double-check your total liability. Staying updated with the latest tax news ensures you don’t leave money on the table. Knowledge about tax deductible expenses is your best asset.
If you live in these “new metros,” celebrate! Your rent now works harder to lower your tax burden. For more technical details, you can also review the new tax rules for landlords to keep your documentation compliant. This update is truly a win for every salaried professional in India’s growing hubs.
🚀 Maximizing your HRA benefits?
Don’t let complex tax rules shrink your paycheck. If you’re living in Bengaluru, Pune, or Hyderabad, you could be saving thousands more under the new 50% limit!