Draft Income Tax Rules 2026: Bengaluru, Pune, Hyderabad & Ahmedabad Set to Get 50% HRA Rebate in New Rules

The draft Income Tax Rules 2026 propose extending the 50% House Rent Allowance (HRA) exemption to four additional metros – Bengaluru, Hyderabad, Pune and Ahmedabad – aligning them with the existing metro cities of Delhi, Mumbai, Kolkata and Chennai. 

Extension of 50 % HRA Exemption to Four New Metro Cities 

Under Rule 279 of the draft rules, the definition of “metro city” for HRA calculation now includes Bengaluru, Hyderabad, Pune and Ahmedabad.  

Employees residing in these cities can claim an exemption of up to 50% of their salary, calculated as the least of the actual HRA received, rent paid exceeding 10% of salary, or the prescribed percentage based on city classification. All other locations remain subject to a 40% cap. 

Impact on Transport Allowance for Employees with Disabilities 

The draft retains a higher transport allowance for disabled employees posted in notified metros. The allowance rises to ₹15,000 plus dearness allowance for blind, deaf, mute or orthopaedically challenged staff in the eight metros, compared with ₹8,000 plus dearness allowance in non‑metro areas. 

Legislative Context and Implementation Timeline 

The changes are part of the Income Tax Department’s effort to standardise special allowances across major urban centres.  

The revised table lists the 8 metros – Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad – for the 50% HRA limit. The rules will become effective once the final notification is issued, as indicated in the draft dated February 10, 2026. 

Read More: ITR Processing Delays Continue: Over 24 Lakh Tax Returns Pending Beyond 90 Days! 

Conclusion 

The draft Income Tax Rules expand the 50% HRA exemption to Bengaluru, Hyderabad, Pune and Ahmedabad, bringing them in line with Delhi, Mumbai, Kolkata and Chennai. The amendment also maintains a higher transport allowance for disabled employees in the eight metros, reflecting a broader approach to special allowances. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.