Tenants living in metro cities can claim a 50% tax exemption on their basic salary as HRA. For those living in non-metros, the benefit is lower at 40%.
The government has decided to offer some relief to those paying high monthly rents in Ahmedabad, Bengaluru, Hyderabad and Pune. According to the Draft Income Tax Rules, 2026, released on February 7, those living in the above mentioned cities will enjoy a 50% house rent allowance (HRA) exemption under the Old Tax Regime. If approved, the proposal will come into force from April 1, 2026.
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How is the HRA exemption calculated?
For the uninitiated, a tenant getting house rent allowance as part of their salary can claim tax exemption on this salary component. The lowest of the following amounts is available as a tax deduction:
- The actual HRA
- 50% of your basic salary plus dearness allowance (DA), if you live in a metro city or 40% of your basic salary plus DA, if you live in non-metros
- Actual rent paid, minus 10% of your basic salary plus DA
Which cities are considered metro for the HRA exemption calculator?
So far, only Delhi, Mumbai, Kolkata and Chennai are considered metro cities for this purpose. Once the Draft Income Tax Rules, 2026, are approved, Ahmedabad, Bengaluru, Hyderabad and Pune will be part of this list. Cities like Noida and Gurugram — where rents have seen a splendid spike in the past half-decade amid a sharp rise in population numbers — have failed to make it to the list
Due to the concentration of well-paying jobs in all these cities, housing affordability in both the core and the suburbs of these cities has declined, forcing millions to stick with renting. At the same time, average urban rents are set to rise by 5-8% in 2026, outpacing inflation.
FAQs
Which cities are considered metro for HRA calculation?
Currently, Delhi, Mumbai, Kolkata, and Chennai are considered metros for HRA calculation. Residents of these four cities can claim 50% of their salaries + DA as exemptions.
Is the RA exemption available under the New Tax regime?
No, the House Rent Allowance exemption under Section 10(13A) is not available under the New Tax Regime under Section 115BAC. Under the new regime, which is the default regime, one needs to give up most exemptions and deductions to get lower tax rates. This will make the entire HRA component fully taxable.
Can I claim HRA for paying rent to my parents?
Yes, you can claim HRA if staying with your parents, provided you are a salaried employee, pay rent regularly via banking channels, and have a valid rental agreement. The house has to be owned by your parents, not you, and they must include this rent as income in their tax returns.
