HRA exemption, with the new 8-city rule
From tax year 2026-27, Bengaluru, Hyderabad, Pune and Ahmedabad join Delhi, Mumbai, Kolkata and Chennai at the 50% limit. See what part of your HRA is tax-free.
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How the exemption is worked out
The exempt part of your HRA is the lowest of three amounts: the HRA you received; rent paid minus 10% of basic salary plus DA; and 50% of basic plus DA in the eight listed cities, or 40% elsewhere. It applies only in the old regime.
Worked example
Basic plus DA ₹6 lakh, HRA ₹3 lakh, rent ₹3 lakh a year, living in Bengaluru. The three limits are ₹3 lakh, ₹2.4 lakh and ₹3 lakh, so ₹2.4 lakh is exempt and ₹60,000 is taxable. Rent of ₹3.6 lakh would make all the HRA exempt.
Common questions
Which cities get the 50% HRA limit from tax year 2026-27?
Under the Income-tax Rules 2026: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Other cities use 40% of basic salary plus DA.
Is HRA exemption available in the new regime?
No. It is available only if you choose the old regime.
How is the exemption worked out?
It is the lowest of: HRA actually received; rent paid minus 10% of basic plus DA; and 50% or 40% of basic plus DA, depending on the city.
Can I claim HRA if I pay rent to my parents?
Yes, if you genuinely pay rent and they own the house. They must show the rent as their income.
For education only, based on your inputs and the Income-tax Rules 2026. Not tax advice.