HRA Exemption in Bengaluru: 50% Limit From 2026-27

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Rules checked on 21 October 2026: the eight-city list and the 50% and 40% limits on the Income Tax Department's House Rent Allowance calculator (incometaxindia.gov.in, page last reviewed 8 October 2026, location list Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad, Bengaluru, any other place). On 21 October 2026 we ran three sets of figures through that calculator, each once as Bengaluru and once as "any other place", and our calculator gave the same exemption all six times. The rule text is rule 279 of the Income-tax Rules, 2026 (G.S.R. 198(E), 20 March 2026), read on 30 September 2026.

Short answer

Rule 279 of the Income-tax Rules, 2026 lets HRA be exempt up to 50% of basic plus DA for rented homes in Bengaluru, from tax year 2026-27. It was 40%. On a ₹60,000 basic with ₹30,000 HRA and ₹35,000 rent a month, the exemption rises from ₹2,88,000 to ₹3,48,000 a year. That is ₹60,000 more, worth ₹18,720 in tax at the 30% slab. If your HRA is 40% of basic or less, the change adds nothing, since the HRA you receive is already the lowest limit. The exemption only counts in the old regime.

What changed for Bengaluru

HRA exemption is the lowest of three amounts: the HRA your employer pays, your rent minus 10% of basic plus DA, and a percentage of basic plus DA. Until tax year 2025-26, that percentage was 50% only in Delhi, Mumbai, Kolkata and Chennai, and 40% everywhere else, Bengaluru included. Rule 279 of the Income-tax Rules, 2026 adds Bengaluru, Hyderabad, Pune and Ahmedabad to the 50% list for tax year 2026-27 onwards.

Two details trip people up. The city is where the rented house is, not where your office is: the department's own calculator asks for the location of the residential accommodation. And the return you file in 2026, for 2025-26, still uses 40% for Bengaluru, because the old rule 2A applies to that year.

Who gains and who gains nothing

The new 50% limit only helps when it was the 40% limit holding your exemption down. If either of the other two limits is lower, nothing changes. Five cases, all with figures a year:

Basic + DA	HRA paid	Rent	Exempt at 50%	Exempt at 40%	Extra
₹7,20,000	₹3,60,000	₹4,20,000	₹3,48,000	₹2,88,000	₹60,000
₹4,80,000	₹2,40,000	₹4,20,000	₹2,40,000	₹1,92,000	₹48,000
₹4,80,000	₹1,92,000	₹3,00,000	₹1,92,000	₹1,92,000	Nothing: HRA paid is 40% of basic
₹6,00,000	₹3,00,000	₹3,00,000	₹2,40,000	₹2,40,000	Nothing: rent is too low
₹7,20,000	₹3,60,000	₹3,60,000	₹2,88,000	₹2,88,000	Nothing: rent is too low

The largest possible gain is 10% of basic plus DA. To get all of it, your HRA allowance has to be at least 50% of basic, and your rent at least 60% of basic plus DA (the 50% limit plus the 10% that is taken off rent). If your pay structure sets HRA at 40% of basic, the new limit adds nothing until the employer raises the HRA component.

What the extra exemption is worth

The extra exemption lowers taxable income in the old regime, so its value is the extra amount times your slab rate plus 4% cess: 31.2% in the 30% slab, 20.8% in the 20% slab. The ₹60,000 in the first row is worth ₹18,720.

That saving only matters if the old regime is your better choice. On an ₹18 lakh salary with the first row's figures, section 123 (old 80C) of ₹1.5 lakh, ₹25,000 of health insurance and professional tax, old-regime tax is ₹1,87,040 at 50% and ₹2,05,760 at 40%. The new regime charges ₹1,50,800, so it still wins. Add ₹2 lakh of interest on a home loan for a house elsewhere, and the old regime drops to ₹1,24,640 at 50% (₹1,43,360 at 40%). Now the old regime wins, and the Bengaluru change widens the gap from ₹7,440 to ₹26,160.

Worked examples

Koramangala renter: ₹60,000 basic, ₹30,000 HRA, ₹35,000 rent a month

For the year: basic ₹7,20,000, HRA ₹3,60,000, rent ₹4,20,000. The three limits are ₹3,60,000 received, ₹4,20,000 − ₹72,000 = ₹3,48,000, and 50% of basic = ₹3,60,000. The exemption is the lowest, ₹3,48,000; under the 2025-26 rule the third limit was ₹2,88,000, so the exemption was ₹2,88,000.

Rent is now the limit. At ₹36,000 a month (₹4,32,000 a year) the exemption would reach the ₹3,60,000 ceiling. Above that, more rent adds nothing.

Whitefield renter whose HRA is 40% of basic

Basic ₹40,000, HRA ₹16,000, rent ₹25,000 a month. For the year: HRA received ₹1,92,000, rent minus 10% of basic ₹3,00,000 − ₹48,000 = ₹2,52,000, 50% of basic ₹2,40,000. The exemption is ₹1,92,000, the HRA received.

Under the old 40% rule the third limit would also have been ₹1,92,000, so the answer is the same. This employee gains nothing from the change. If the employer raised HRA to 50% of basic (₹20,000 a month), the exemption would go up to ₹2,40,000.

Tips and tricks

How we would use it

Questions people ask

Is Bengaluru a metro city for HRA now?

Yes, from tax year 2026-27. Rule 279 of the Income-tax Rules, 2026 lists eight cities where the limit is 50% of basic plus DA: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Everywhere else it is 40%.

Can I claim 50% for Bengaluru in my 2025-26 return?

No. The return for 2025-26, filed in 2026, follows the old rule 2A, which gives 50% only to Delhi, Mumbai, Kolkata and Chennai. Bengaluru stays at 40% for that year.

I work in Bengaluru but rent in Hosur. Which limit applies?

The limit follows the rented house, not the office. The department's calculator asks for the location of the residential accommodation, and Hosur is not on the list, so 40% applies.

Why did my exemption not go up?

Because another limit is lower. If the HRA your employer pays is 40% of basic or less, or your rent minus 10% of basic is below 40% of basic, the new 50% limit never becomes the lowest of the three.

Does the change help under the new tax regime?

No. HRA is fully taxable in the new regime (section 202 of the Income-tax Act, 2025), so the exemption, and the change, only count if you choose the old regime.

How much rent do I need for the full exemption?

If your HRA is at least half your basic plus DA, rent of 60% of basic plus DA reaches the ceiling. On a ₹60,000 basic that is ₹36,000 a month.

Written by Bulan Sarkar, who checked the results by hand and against a second public calculator. Use it for planning; it isn't tax or investment advice.

Sources

HRA Exemption Calculator

See how much of your house rent allowance is tax-free under the 2026-27 rules, with the three limits worked out on your numbers.