What changed on 1 April 2026
The Income-tax Rules, 2026 (notified on 20 March 2026) replaced the old Rule 2A with Rule 279. The HRA formula is the same, but the list of cities where you can claim up to 50% of salary grew from four to eight:
| Up to FY 2025-26 | From FY 2026-27 | |
|---|---|---|
| 50% of salary | Mumbai, Delhi, Kolkata, Chennai | Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad |
| 40% of salary | All other places | All other places |
Worked example in Pune
Basic pay ₹60,000 a month (no DA), HRA ₹30,000, rent ₹35,000, for the whole year, old tax regime:
| Test (for 12 months) | Amount |
|---|---|
| 1. Actual HRA received | ₹3,60,000 |
| 2. Rent paid ₹4,20,000 − 10% of salary ₹72,000 | ₹3,48,000 |
| 3. 50% of salary ₹7,20,000 | ₹3,60,000 |
| Tax-free HRA = the lowest | ₹3,48,000 |
Your tax-free HRA is ₹3,48,000 a year. Under last year’s 40% limit, test 3 would have been ₹2,88,000, and the exemption only ₹2,88,000. The new rule adds ₹60,000 of tax-free income — worth about ₹18,720 in tax at the 30% slab plus cess.
Does it help everyone in these cities?
Only if the 40% test was the one limiting you. If your rent is modest, test 2 (rent minus 10% of salary) is often lower, and the new 50% limit makes no difference. Some quick examples for a full year:
| City | Basic | HRA | Rent | FY 2025-26 | FY 2026-27 | Gain |
|---|---|---|---|---|---|---|
| Bengaluru | ₹50,000 | ₹25,000 | ₹30,000 | ₹2,40,000 | ₹3,00,000 | ₹60,000 |
| Hyderabad | ₹40,000 | ₹16,000 | ₹20,000 | ₹1,92,000 | ₹1,92,000 | ₹0 |
| Pune | ₹60,000 | ₹30,000 | ₹35,000 | ₹2,88,000 | ₹3,48,000 | ₹60,000 |
| Ahmedabad | ₹35,000 | ₹14,000 | ₹15,000 | ₹1,38,000 | ₹1,38,000 | ₹0 |
| Bengaluru | ₹1,00,000 | ₹50,000 | ₹60,000 | ₹4,80,000 | ₹6,00,000 | ₹1,20,000 |
A quick way to tell if the change helps you
The new 50% limit makes a difference only when both of these are true: your monthly rent is more than half of your basic + DA, and your HRA is more than 40% of your basic + DA. In the Pune example, rent of ₹35,000 is more than half of ₹60,000, and HRA of ₹30,000 is more than 40% of it — so the change helps. If either is not true, your exemption stays the same as last year.
Before you count on it
- Old regime only. HRA exemption is not available in the new tax regime, which is the default. Tell your employer you are choosing the old regime if it works better for you.
- Proof: keep rent receipts or a rent agreement, and give your employer the landlord’s PAN if your rent is over ₹1,00,000 a year. From FY 2026-27 the declaration is made on Form 124.
- It is where you live that counts, not where your office is.
FAQ
Is Pune a metro city for HRA in FY 2026-27?
Yes. Rule 279 of the Income-tax Rules, 2026 gives Pune, Bengaluru, Hyderabad and Ahmedabad the 50% limit from FY 2026-27. For FY 2025-26 they still use 40%.
How much HRA is exempt with ₹60,000 basic, ₹30,000 HRA and ₹35,000 rent in Pune?
For 12 months in FY 2026-27: the lowest of ₹3,60,000 (HRA), ₹3,48,000 (rent minus 10% of salary) and ₹3,60,000 (50% of salary), so ₹3,48,000. In FY 2025-26 it was ₹2,88,000.
Does the new 50% limit apply in the new tax regime?
No. HRA exemption is only available in the old regime, whichever city you live in.
Sources (checked 5 Nov 2026): Rule 279, Income-tax Rules, 2026 (incometaxindia.gov.in/w/rule-279-1); Income-tax Act, 2025 Schedule III Table Sl. No. 11; CBDT notification of the Income-tax Rules, 2026 dated 20 Mar 2026, in force 1 Apr 2026; Income-tax Act, 1961 s.10(13A) and Rule 2A (FY 2025-26). Cross-checked with ThePrint, Upstox and Mondaq reports on the final rules.