India's CBDT raises HRA exemption to 50% for Hyderabad salaried employees
Change
India's CBDT raised the house rent allowance exemption to 50% of salary for residents of Hyderabad, Bengaluru, Pune and Ahmedabad, effective April 1, 2026, while other locations remain capped at 40%.
Why it matters
The change changes the tax-computation rule set that determines how much of an employee's salary is excluded from taxable income in the newly included urban agglomerations. Employers and tax-preparation processes will need to adopt revised HRA calculation procedures to avoid incorrect withholding and filings.
Implications
- • Employer payroll departments must update payroll calculation rules and tax-withholding settings to apply the revised HRA computation for employees located in the newly specified urban agglomerations.
- • Chartered accountants and tax consultants must review clients' HRA claims and advise on required documentation and adjustments to tax filings under the new calculation rules.
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