New Delhi: The government has proposed expanding the list of cities eligible for a higher House Rent Allowance (HRA) exemption under the old tax regime, a move that could offer meaningful tax relief to salaried employees in large urban centres.
At present, salaried taxpayers living in Mumbai, Delhi, Kolkata and Chennai can claim an HRA exemption of up to 50 per cent of salary, while those residing in other cities are eligible for a 40 per cent exemption. Under the proposed change, the higher 50 per cent exemption would be extended to Bengaluru, Hyderabad, Pune and Ahmedabad, reflecting their growing importance as economic and employment hubs.
If approved, employees living in these eight cities would qualify for an HRA exemption of up to 50 per cent of salary, while taxpayers in all other locations would continue with the 40 per cent limit. Officials said the proposal aims to align HRA provisions with shifting urban demographics and the sharp rise in housing rents in cities that have seen rapid growth in technology, manufacturing and services over the past decade.
The proposed revision is expected to benefit salaried individuals who continue to opt for the old tax regime, where exemptions such as HRA play a crucial role in reducing tax liability. Under the new tax regime, most exemptions, including HRA, are not available, making the change particularly relevant for employees weighing their tax regime options.
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