New HRA Rule 2026: 4 Cities Added to the 50% Exemption List
By Nitish Bharadwaj · Published Jul 6, 2026 · 5 min
Draft Income-tax Rules, 2026 expand the list of cities eligible for the higher 50% HRA exemption rate from four metros (Delhi, Mumbai, Kolkata, Chennai) to eight, adding Bengaluru, Hyderabad, Pune, and Ahmedabad. The change applies from FY 2026-27 (April 1, 2026 onward) — it does not affect the FY 2025-26 return most salaried taxpayers are filing by July 31, 2026, which still uses the old four-city list. This guide explains who benefits, why the exemption only matters in the old tax regime, and how much extra a renter in one of the four new cities can expect to save once the rule takes effect.
If you rent an apartment in Bengaluru, Hyderabad, Pune, or Ahmedabad, your HRA tax exemption has quietly been running on a lower rate than someone with an identical salary and rent in Delhi or Mumbai. The Income-tax Rules, 2026 (notified March 20, 2026) change that — but the new rate doesn't apply to the return you're filing right now.
Fact 1: What Actually Changed — 4 New Cities Join the 50% List
Under Section 10(13A), HRA exemption is the least of three amounts: actual HRA received, rent paid minus 10% of basic salary, or 50% of basic salary (metro cities) / 40% of basic salary (non-metro cities). Until now, only Delhi, Mumbai, Kolkata, and Chennai qualified for the higher 50% rate. The Income-tax Rules, 2026 (notified March 20, 2026) add Bengaluru, Hyderabad, Pune, and Ahmedabad to that list — taking it from 4 cities to 8 — in recognition of how rents in these cities have caught up with, and in some pockets overtaken, the original four metros.
| City | Classification Before | Classification From FY 2026-27 |
|---|---|---|
| Delhi, Mumbai, Kolkata, Chennai | 50% (Metro) | 50% (Metro) — unchanged |
| Bengaluru, Hyderabad, Pune, Ahmedabad | 40% (Non-metro) | 50% (Metro) — newly added |
| All other cities | 40% (Non-metro) | 40% (Non-metro) — unchanged |
Fact 2: This Applies From FY 2026-27 — Not the Return You're Filing Now
Fact 3: The Exemption Still Only Helps You in the Old Regime
This is the detail that determines whether the change is worth anything to you at all: HRA exemption under Section 10(13A) is available only if you opt for the old tax regime. The new tax regime, which is the default from FY 2025-26 onward, does not allow HRA exemption regardless of which city you live in or which metro classification applies. Our HRA in the new tax regime guide breaks down the full math on whether the old regime is worth switching to once you factor in a large HRA claim.
Fact 4: Worked Example — What the Extra 10% Is Actually Worth
| Component | Non-Metro (40%) | Metro (50%, New) |
|---|---|---|
| Actual HRA received (assume 50% of basic) | ₹4,00,000 | ₹4,00,000 |
| Rent paid minus 10% of basic | ₹2,40,000 − ₹80,000 = ₹1,60,000 | ₹2,40,000 − ₹80,000 = ₹1,60,000 |
| % of basic salary limit | 40% × ₹8,00,000 = ₹3,20,000 | 50% × ₹8,00,000 = ₹4,00,000 |
| HRA exemption (least of the three) | ₹1,60,000 | ₹1,60,000 |
The worked example above shows why the city upgrade doesn't automatically translate into extra savings for everyone: the exemption is the least of the three figures, and for many salaried employees, the binding constraint is actual rent paid minus 10% of basic salary — a number the city classification doesn't touch. The 50% cap only becomes the binding limit, and therefore only delivers extra tax savings, for higher earners paying comparatively lower rent relative to a large basic salary. Use the HRA calculator with your own basic salary and rent figures once the FY 2026-27 rates apply to see whether the city change actually moves your number, or see our full HRA exemption calculation guide for how all three parts of the formula interact beyond just the city rate.
Fact 5: It Comes Bundled With a Separate Meal Voucher Benefit Worth Knowing
The same Income-tax Rules, 2026 (notified March 20, 2026) also make meal vouchers of up to ₹200 per meal tax-exempt — up to roughly ₹1.05 lakh a year — and unlike the HRA change, this benefit applies under both the old and new tax regimes. If your employer offers meal cards or vouchers as part of your compensation structure, it's worth confirming this benefit is being applied correctly from FY 2026-27, regardless of which regime you choose. It doesn't change the HRA decision, but it's a second, regime-agnostic reason the new rules are worth reading in full rather than skimming for just the city list.
If you're a renter in one of the four newly added cities and typically claim HRA under the old regime, the practical step for now is simple: keep filing FY 2025-26 under the existing 4-city rule, and revisit your regime choice and HRA math once FY 2026-27 begins, using the old vs new regime comparison to check whether the improved exemption changes which regime comes out ahead for you.