HRA Rules: Since the government rolled out the new tax regime, interest in the old tax regime has decreased. However, the government is now looking to revive the old tax regime. If this occurs, employed individuals could see significant relief. Previously, the higher tax exemption on House Rent Allowance (HRA) was restricted to just four metro cities, but there are now plans to broaden this scope. This initiative is a wonderful gift for countless employees striving to boost their savings amid rising rents and inflation.
While the government may be advocating for a “new tax regime,” it seems there are efforts to breathe new life into the old tax regime. The suggested expansion of the metro list for HRA, along with increases in education and hostel allowances, indicates that the old tax regime is still very much alive.
Understand the government’s proposal
Under the current regulations, if you reside in Mumbai, Delhi, Kolkata, or Chennai, you can claim HRA up to 50% of your salary under the old tax regime. For those living in other cities, this limit stands at 40%. However, changes are on the horizon. The draft rules aim to add Bengaluru, Hyderabad, Pune, and Ahmedabad to the 50% exemption category. Millions of professionals in these IT and financial centers will now have access to greater tax benefits. This adjustment reflects the reality of evolving urban populations and the increasing rents in these areas.
What is driving this change?
The primary reason for this transition is the evolving nature of these cities. Over the last ten years, cities like Bengaluru, Hyderabad, and Pune have remained “non-metro” in name only; in reality, their cost of living and quality of life are comparable to any major city. These locations have transformed into significant technology, manufacturing, and service hubs in the nation.
As employment opportunities have increased, residential rents have skyrocketed. Consequently, the previous 40% cap was proving insufficient for the workers living in these cities. This government move acknowledges the changing urban demographics and the ground realities of these cities becoming economic hubs.
50% discount on HRA will be available in these cities
After the changes come into effect, residents of these cities will be able to claim 50% of the HRA exemption they were entitled to under the old tax regime. These include Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, and Pune.
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Sweta Mitra
Working in the media for last 7 years. The journey started in the year 2018. For the past few years, my working experience has been in Bengali media. Currently working at Timesbull.com. Here I write like Business, National, and Utility News. My favorite hobbies are listening to music, traveling, food,...
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