The announcement of new Income Tax Rules taking effect on April 1, 2026, brings good news for taxpayers in Hyderabad. They will be able to claim an HRA exemption of up to 50% of their salary. Previously, this exemption was limited to 40%. The Central Board of Direct Taxes announced these rules on March 20, 2026.
HRA Exemption Rises to 50% for Salaried Employees
Hyderabad, Bengaluru, Pune, and Ahmedabad are now included among the urban areas eligible for this higher tax benefit, joining Mumbai, Delhi, Kolkata, and Chennai. Employees in other regions of the country can still claim a 40% exemption. It provides a tax break for salaried workers living in rented homes.
Requirements of landlord-tenant relationship to become qualified
However, the new rules have requirements regarding the landlord-tenant relationship. Taxpayers must provide details such as the name, address, and Permanent Account Number of the landlord or landlords if the total rent paid during the tax year exceeds ₹1,00,000. They must also disclose their relationship with the landlord, if any.
“The entire HRA received is not always fully exempt from tax. To determine the exempt amount, we consider the least of these three, HRA received from your employer, actual rent paid minus 10% of your salary, and 50% of basic salary for those living in metro cities or 40% of basic salary for those in non-metro cities,” said Arnaz Bisney, a financial advisor based in Hyderabad.
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