What Changed on 1 April 2026
HRA exemption is the lowest of: actual HRA received; 50% or 40% of basic + DA; and rent paid minus 10% of basic + DA. Until FY 2025-26, only Mumbai, Delhi, Kolkata and Chennai qualified for 50%. From FY 2026-27, Bengaluru, Hyderabad, Pune and Ahmedabad join them.
| City | FY 2025-26 | FY 2026-27 |
|---|---|---|
| Mumbai, Delhi, Kolkata, Chennai | 50% | 50% |
| Bengaluru, Hyderabad, Pune, Ahmedabad | 40% | 50% |
| All other cities | 40% | 40% |
How Much Can It Save?
A Pune employee with basic salary of ₹50,000 a month, HRA of ₹25,000 and rent of ₹35,000:
- Actual HRA: ₹3,00,000 a year
- Rent minus 10% of basic: ₹4,20,000 − ₹60,000 = ₹3,60,000
- Basic-salary limit: 40% = ₹2,40,000 last year, 50% = ₹3,00,000 now
The exemption rises from ₹2,40,000 to ₹3,00,000. In the 30% slab that is about ₹18,720 less tax a year. The gain only appears when the basic-salary limit was the lowest of the three — if your rent is low, the rent rule limits you instead.
HRA Paperwork Checklist
- Rent agreement showing rent, address and landlord name.
- Monthly rent receipts signed by the landlord, or bank/UPI records of each payment.
- Landlord's PAN if annual rent is above ₹1,00,000.
- Relationship declaration if the landlord is a relative — now required under the new rules.
- Submit proofs to your employer before the payroll deadline (usually January–February); otherwise claim the exemption in your return.
Choosing Your Regime
HRA exemption is only available in the old regime. A bigger HRA exemption makes the old regime more attractive, but it still has to beat the new regime's lower rates. Our old vs new regime guide shows the break-even points.
Calculate your HRA exemption →Frequently Asked Questions
Does Pune get 50% HRA exemption?
Yes, from FY 2026-27 (1 April 2026) under the Income-tax Rules, 2026. Until FY 2025-26 Pune was a 40% city.
Is landlord PAN required for HRA?
Yes, when the rent you pay exceeds ₹1,00,000 in a year.
Can I claim HRA if I pay rent to my parents?
Yes, if your parent owns the house, you genuinely pay rent and your parent declares it as income. You must disclose the relationship.
Can I claim HRA under the new tax regime?
No. HRA exemption is allowed only under the old regime.
This guide explains general rules for educational purposes and reflects the law as reviewed in October 2026. It is not tax or legal advice. For your own situation, please consult a Chartered Accountant or the official Income Tax Department and GST portals.