India raises house rent allowance (HRA) exemption to 50% in Hyderabad
Change
India's Central Board of Direct Taxes notified Income Tax Rules effective April 1, 2026 that raise the house rent allowance (HRA) exemption to 50% of salary for salaried employees in Hyderabad while other locations remain capped at 40%.
Why it matters
Payroll and human resources teams must change withholding and payroll calculations to reflect the higher exemption for Hyderabad-based renters, or they will produce incorrect tax deductions and year-end reconciliation work. Tax preparers must apply the revised exemption when preparing returns for the period beginning April 1, 2026 to secure the benefit for eligible filers.
Implications
- • Employer payroll teams must update payroll tax withholding rules and payroll software to reflect the 50% HRA exemption effective April 1, 2026 — failure will produce incorrect employee tax deductions and additional reconciliation work at year-end.
- • Personal tax return preparers and accountants handling Hyderabad clients must apply the higher exemption when filing income tax returns for the period starting April 1, 2026 — clients who do not claim it will forfeit reduced taxable income.
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