Amid rising rents and increasing urban expenses, there’s news of significant relief for the salaried class. The central government is preparing to make significant changes to the rules regarding House Rent Allowance (HRA). If implemented, this proposal could directly increase the in-hand salaries of employees living in many of the country’s major cities.
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HRA Rules Change: Amidst high rents and rising urban living costs, some relief has come for the salaried class. The central government is preparing to make a major change to an old rule related to House Rent Allowance (HRA). If the proposal is approved, the in-hand salaries of employees living in several major cities could increase, easing their tax burden.
Currently, under the old tax system, salaried taxpayers living in only four metropolitan cities: Delhi, Mumbai, Kolkata, and Chennai, receive a tax exemption of up to 50 percent on HRA. However, this limit is set at 40 percent for employees living in all other cities.
Which cities could benefit most?
According to the government’s proposal, the list of cities with a 50 percent HRA exemption could be expanded. The plan is to include Bengaluru, Hyderabad, Pune, and Ahmedabad. This means that if this change is implemented, employees living in these cities will also receive tax relief comparable to those in metropolitan cities like Delhi and Mumbai.
What will be the new proposed structure?
According to the proposal, the new HRA exemption system could look something like this:
50% HRA exemption: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad
40% HRA exemption: All other cities in the country
Why was the rule change necessary?
Over the past decade, cities like Bengaluru, Hyderabad, and Pune have emerged as major hubs for the IT, manufacturing, and service sectors. Job opportunities have increased in these cities, but housing rents have also risen sharply. The government believes it is necessary to update the HRA rules to reflect current urban realities.
Which employees will directly benefit?
This proposal will be especially beneficial for employees who still choose the old tax regime. This system provides benefits like HRA exemptions, whereas the new tax system does not provide most exemptions, including HRA.
What will be the impact on in-hand salary?
The increase in HRA exemptions will reduce taxable income, directly impacting employees’ monthly in-hand salaries. This change could prove to be a significant relief, especially for those living in expensive cities like metros.
