HRA Exemption Is Not Limited to Metro Cities
Reviewed by CA Nikhil Gupta · Last reviewed 30 August 2026
HRA exemption can be claimed for eligible rented accommodation anywhere in India.
The four-city list changes only the city limb from 40% to 50% of HRA salary; it does not determine basic eligibility.
Use the HRA Exemption Calculator — Tax Year 2026-27 to apply these points to your figures.
Legal or Computational Framework
This article uses the AY 2026–27 framework for income earned in FY 2025–26 under section 10(13A) of the Income-tax Act, 1961 read with Rule 2A. For this period, and in the current official departmental material reviewed on 1 August 2026, the 50% salary limb is restricted to Mumbai, Kolkata, Delhi and Chennai; all other locations use 40%. HRA exemption is ordinarily unavailable under the default new tax regime, so regime selection is a threshold eligibility question.
Worked Example
An employee in Indore has HRA salary of ₹5,00,000, HRA of ₹1,50,000 and rent of ₹2,10,000. The limbs are ₹1,50,000, ₹1,60,000 and ₹2,00,000. Exemption is the full ₹1,50,000 even though Indore is a 40% city because actual HRA is the lowest limb.
What Generic Pages Miss
- Saying non-metro HRA is always 40% exempt.
- Treating Tier-1 and Tier-2 labels as tax law.
- Ignoring the actual rent limb.
- Using city compensation policies as Rule 2A authority.
- Claiming exemption without actual rent.
Practical Documentation Checklist
- Rented property address
- HRA salary breakup
- Rent evidence
- Employer HRA statement
- Old-regime selection
See the broader Income Tax & Salary knowledge hub for related rules and calculators on this topic.
Finin2min Summary
HRA exemption can be claimed for eligible rented accommodation anywhere in India. The four-city list changes only the city limb from 40% to 50% of HRA salary; it does not determine basic eligibility.
Frequently Asked Questions
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in
Page source links
Primary sources & related provisions
Statutory provisions referenced in this guide: