Expanded metro list for HRA adds shine to old tax regime

FOR MANY SALARIED taxpayers, especially those residing in high-rent cities, the ability to claim house rent allowance (HRA) exemption often determines whether the old regime results in lower tax outgo compared to the concessional new regime.

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Recognising its importance, the income tax department has introduced draft Income Tax Regulations proposing much-anticipated changes to HRA rules.

Expansion of metro cities

Under the existing framework, employees residing in notified metro cities are eligible to claim HRA exemption up to 50% of salary (basic plus dearness allowance), while those in non-metro cities are limited to 40%. Historically, only a few cities qualified as metros, despite several urban centres experiencing comparable rental inflation.