Hyderabad Added to Metro List for HRA Benefits Under New Income Tax Rules
Central government expands metro classification to include Hyderabad and other cities raising HRA tax exemption limits to 50 percent and introducing stricter compliance rules effective from April next financial year.
- Hyderabad HRA tax exemption increased to 50 percent for eligible employees.
- New income tax rules 2026 introduce stricter HRA compliance requirements.
- Metro cities list expanded to include Hyderabad Bengaluru Pune and Ahmedabad.
In a significant relief for salaried employees living in major urban centres, the central government has expanded the list of metro cities for House Rent Allowance benefits. Hyderabad is now officially included in this category, bringing it on par with cities like Delhi Chennai and Kolkata for higher tax exemption on HRA.
The move comes as part of the new income tax framework set to be implemented from April 1 in the upcoming financial year. With the new rules in place, employees residing in Hyderabad along with Bengaluru Pune and Ahmedabad will now be eligible to claim up to 50 percent of their salary as HRA tax exemption. Previously, this higher limit was restricted only to a few metro cities, while others were capped at 40 percent.
The revised policy is part of the newly introduced Income Tax Act 2025, which replaces the older 1961 legislation. The Act has already received parliamentary approval and has been formally notified by the President. The government aims to simplify tax structures while also extending benefits to a larger section of urban taxpayers.
Apart from increasing the exemption limits, the government has also tightened rules to ensure transparency in HRA claims. Employees must now disclose details of their relationship with the landlord while claiming tax benefits. This information must be submitted through a specified form, making it harder for individuals to misuse the provision with incorrect declarations.
It is important to note that these enhanced HRA benefits apply only to individuals who opt for the old tax regime. Taxpayers choosing the new tax regime will not be eligible for these deductions, continuing the existing policy approach.
The structural changes in the new tax law are also notable. The number of chapters has been reduced significantly, and the total sections have been streamlined, indicating the government’s intent to make the tax system more concise and easier to navigate.
For employees in Hyderabad and other newly added metro cities, the update brings tangible financial relief, especially in the face of rising rental costs in urban areas.
