India's Central Board of Direct Taxes raises HRA exemption to 50% for Hyderabad
→Payroll teams in Hyderabad must apply 50% HRA exemption from Apr 1, 2026
Change
India's Central Board of Direct Taxes has set the House Rent Allowance (HRA) exemption for salaried employees in Hyderabad at 50% of salary, effective April 1, 2026.
Why it matters
The 50% HRA exemption applies only to residents of specified urban agglomerations: Hyderabad, Bengaluru, Pune and Ahmedabad join Mumbai, Delhi, Kolkata and Chennai for the higher threshold. Employees in other locations are constrained to a 40% HRA exemption under the new Income Tax Rules.
Implications
- — Payroll teams at employers with Hyderabad-based employees must update payroll calculations and tax-deduction-at-source (TDS) settings immediately — failure will produce incorrect tax withholding for affected employees.
- — Tax-compliance and TDS filing teams at employers must apply the 50% HRA rate in employee tax statements and quarterly returns now — failure will result in misreported TDS and require corrective filings or invite tax-administration scrutiny.
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Source
View on The Hindu