HRA 50% Now Covers Bengaluru, Pune, Hyderabad, Ahmedabad
If you rent in Bengaluru, Pune, Hyderabad or Ahmedabad, your House Rent Allowance just got more valuable. The Income-tax Rules, 2026 moved these four cities into the 50% HRA bracket for FY 2026-27 — the same tier as Delhi, Mumbai, Kolkata and Chennai. Until last year you were capped at 40%. The catch: those extra 10 points turn into real tax savings only for some renters, and for high earners the bigger exemption can quietly flip your old-vs-new regime decision. Here is the math your payroll portal will not run for you.
Summary
| Item | Old rule (to FY 2025-26) | New rule (FY 2026-27) |
|---|---|---|
| Cities at 50% cap | Delhi, Mumbai, Kolkata, Chennai | + Bengaluru, Pune, Hyderabad, Ahmedabad |
| Exemption ceiling | 40% of (basic + DA) | 50% of (basic + DA) |
| Governing law | Section 10(13A), Rule 2A | Section 10(13A), Rule 2A |
| Regime where it counts | Old regime only | Old regime only |
| Extra exemption (₹28L example) | — | ₹1,20,000 per year |
| Tax saved at 30% slab | — | ₹37,440 per year |
| New disclosure | None | Landlord relationship must be stated |
How the new HRA cap actually works
HRA exemption under Section 10(13A) read with Rule 2A is the least of three numbers — and the city cap is only one of them.
The three-way test
- Actual HRA received from your employer (per year)
- 50% of salary (basic + DA) if you live in the eight metros; 40% everywhere else
- Rent paid minus 10% of salary (per year)
Your exemption is the smallest of these three. Bengaluru, Pune, Hyderabad and Ahmedabad just had their middle figure lifted from 40% to 50% of salary. "Salary" here means basic plus dearness allowance — not your full CTC, and not basic plus HRA. Get that base wrong and every number below is wrong.
When the 50% bump helps — and when it does nothing
The middle leg only matters if it is the smallest of the three. For most renters the binding number is the third leg — rent paid minus 10% of salary — and that leg did not change at all. So if your rent is modest relative to your basic, the new 50% cap gives you exactly zero extra exemption.
The bump helps only when your rent is high enough that the 50% leg becomes the limiting one — roughly when your annual rent crosses about 60% of your basic salary. Someone paying ₹18,000 a month on a ₹14L basic sees no change whatsoever; someone paying ₹60,000 a month on the same basic gets the full benefit. Read the headlines accordingly.
The disclosure you can no longer skip
Rules 2026 add a requirement to disclose your relationship with the landlord. Renting from a parent or spouse is still allowed, but it now has to be declared, the rent must genuinely move through a bank transfer (not cash), you need a registered rent agreement, and you must report the landlord's PAN once annual rent crosses ₹1,00,000. Treat a family-landlord claim as a real tenancy or drop it.
Real example: Salaried, ₹28L CTC, Bengaluru
Aarti rents a flat in Bengaluru for ₹60,000 a month (₹7,20,000 a year). Her basic + DA is ₹12,00,000 and her HRA component is ₹6,60,000 a year, on a taxable salary of about ₹26,00,000. Watch what the city reclassification does — and then what it does to her regime choice.
| Item | Old 40% cap | New 50% cap (FY 2026-27) |
|---|---|---|
| Least-of-three exemption | ₹4,80,000 | ₹6,00,000 |
| Extra exempt income | — | ₹1,20,000 |
| Old-regime tax | ₹3,80,640 | ₹3,43,200 |
| New-regime tax (fixed) | ₹3,51,000 | ₹3,51,000 |
| Cheaper regime | New, by ₹29,640 | Old, by ₹7,800 |
The example assumes she also claims ₹1,50,000 under 80C, ₹25,000 under 80D and ₹50,000 under 80CCD(1B). The ₹1,20,000 of extra exemption cuts ₹37,440 off her old-regime bill — and that single change flips her optimal regime from new to old. Anyone who locked in their FY 2026-27 regime on last year's numbers and lives in these four cities should re-run this before declaring to payroll, because HRA exists only in the old regime — the new regime taxes your rent allowance in full.
What to do this week
- Pull your salary structure and note basic + DA — not CTC — then run the least-of-three test with 50% in the middle leg.
- If the 50% leg is now your smallest number, recompute your old-regime tax with the larger exemption.
- Compare that against your new-regime tax (₹75,000 standard deduction, no HRA) and pick the lower — re-declare to payroll if the winner changed.
- Line up proof now: bank-transfer rent, a registered agreement, landlord PAN above ₹1L annual rent, and the new landlord-relationship disclosure.
The bottom line
The headline — "50% HRA now in four more cities" — is real but oversold. It moves the needle only for renters whose rent is large relative to their basic, and its biggest effect is indirect: it can tip a high earner from the new regime back to the old. Stack the bigger HRA with 80C (₹1,50,000), 80D (₹25,000) and 80CCD(1B) (₹50,000), and the old regime becomes competitive again for metro renters who had already written it off. The number that matters is not the cap — it is which regime wins after you apply it.
Ready for a personalised plan? Start your free diagnosis — 6 questions, 5 minutes.
