HRA exemption rises to 50% for salaried employees in Hyderabad under new IT rules

Hyderabad tax-payers can now claim a 50% HRA exemption under new tax rules effective April 1, 2026.

The notification of new Income Tax Rules that come into force from April 1, 2026 brings good news for tax-payers from Hyderabad who will be eligible to claim HRA exemption of up to 50% of the salary. Earlier, this exemption was capped at 40%. The Central Board of Direct Taxes notified the rules on March 20, 2026.

Hyderabad, Bengaluru, Pune and Ahmedabad are among the new urban agglomerations that join Mumbai, Delhi, Kolkata and Chennai for this higher tax break. Employees in other places in the country are allowed a 40% exemption.

HRA exemption is a tax break for salaried employees living in rented houses.

However, the new rules have a caveat about landlord-tenant relationship. The rules state that assessee will have to give details about “Name, address and Permanent Account Number of the landlord or landlords, where the aggregate rent paid during the tax year exceeds ₹1,00,000 and relationship with the landlord, if any.”

“The entire HRA received is not always fully exempt from tax. The least of the following three are taken to exempt from tax: HRA received from your employer, actual rent paid minus 10% of salary, 50% of basic salary for those living in metro cities and 40% of basic salary for those living in non-metro cities,” said Arnaz Bisney, a financial advisor based out of Hyderabad.