Metro vs Non-Metro HRA 2026: The New 8-City List
From tax year 2026-27, eight cities get the 50% HRA limit: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. What it is worth, with worked examples.
Updated 27 September 2026 · 4 minute read
One number in the HRA exemption depends on where you live: the cap of 50% of basic plus DA in the listed cities, against 40% everywhere else. For years the list was four cities. From tax year 2026-27, rent paid from 1 April 2026, the Income-tax Rules, 2026 extended it to eight: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. If you rent in one of the four new cities and claim HRA in the old regime, your exemption can go up this year.
Where the 50/40 rule fits
Your HRA exemption, in the old regime only, is the least of three amounts:
- The HRA your employer actually paid you
- Rent paid minus 10% of basic plus DA
- 50% of basic plus DA in the eight listed cities, 40% anywhere else
The city affects only the third limb. If the first or second is already the smallest for you, the city changes nothing. But when the third is the binding one, which is typical when rent is high compared with basic, the 50 against 40 gap is real money. The complete HRA exemption guide covers the whole formula.
The list, before and after
| City | FY 2025-26 (rent up to March 2026) | Tax year 2026-27 onwards |
|---|---|---|
| Delhi | 50% | 50% |
| Mumbai | 50% | 50% |
| Kolkata | 50% | 50% |
| Chennai | 50% | 50% |
| Bengaluru | 40% | 50% |
| Hyderabad | 40% | 50% |
| Pune | 40% | 50% |
| Ahmedabad | 40% | 50% |
| Everywhere else, including Gurugram, Noida, Navi Mumbai and Thane | 40% | 40% |
The new list does not reach back to FY 2025-26. A return for income earned up to March 2026 still treats Bengaluru, Hyderabad, Pune and Ahmedabad as 40% cities.
What counts is where the rented house is, not where your office is. Gurugram and Noida are next to Delhi but are not Delhi, so a flat there is still a 40% case even if you work in Delhi. Navi Mumbai and Thane are separate from Mumbai for this purpose.
What the change is worth: a worked example
Priya lives in Bengaluru:
- Basic salary: ₹40,000 a month (₹4,80,000 a year)
- HRA received: ₹25,000 a month (₹3,00,000 a year)
- Rent paid: ₹25,000 a month (₹3,00,000 a year)
Under the FY 2025-26 rules
- Actual HRA: ₹3,00,000
- Rent minus 10% of basic: ₹3,00,000 minus ₹48,000 = ₹2,52,000
- 40% of basic: ₹1,92,000
The least is ₹1,92,000, so ₹1,08,000 of her HRA is taxable.
Under the 2026-27 rules
- Actual HRA: ₹3,00,000
- Rent minus 10% of basic: ₹2,52,000
- 50% of basic: ₹2,40,000
The least is ₹2,40,000, so only ₹60,000 is taxable. Same salary, same rent: ₹48,000 more of her HRA is tax-free, worth about ₹15,000 a year at the 30% slab. Try your own numbers in the HRA exemption calculator, which uses the new list.
If Priya's rent were ₹12,000 a month, the second limb would be the smallest under both rules and the city change would not help her at all. It pays off when rent is high relative to basic.
Moving cities mid-year
The exemption is worked out for the period each set of facts held, so a move splits the year. Say you lived in Kolkata from April to September and in Jaipur from October to March:
- April to September: the least of HRA received, rent paid minus 10% of basic plus DA, and 50% of basic plus DA, all for those six months.
- October to March: the same, with Jaipur rent and a 40% cap.
- Total exemption: the two added together.
The same period-by-period logic applies when your rent or basic changes during the year. Payroll software does it month by month; if you claim directly in your return, don't apply one city's rate to the whole year.
- Keep separate rent agreements and receipts for each city. The rent receipt generator makes a clean set per landlord.
- Give each landlord's PAN if their share of your rent passes ₹1,00,000 in the year.
- Tell payroll after the move, and update your declaration on Form 124, which replaced Form 12BB from April 2026, so monthly TDS follows the new city.
The takeaway
From tax year 2026-27 eight cities get the 50% cap, and Bengaluru, Hyderabad, Pune and Ahmedabad joined the list. It matters when your rent is high compared with your basic, only in the old regime, and only for rent paid from April 2026. Check whether the old regime now beats the new one for you with the income tax calculator.
Frequently asked questions
Which cities are metro cities for HRA in 2026?
From tax year 2026-27, eight: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. The Income-tax Rules, 2026 added the last four. Every other city is capped at 40% of basic plus DA.
Is Bengaluru a metro city for HRA now?
Yes, from tax year 2026-27, which covers rent paid from 1 April 2026. For FY 2025-26 and earlier years it remains a 40% city.
Is Gurgaon or Noida a metro city for HRA?
No. Both are separate from Delhi, so both stay at 40%. The rule follows where your rented house is, not where you work.
Does the new HRA city list apply to my FY 2025-26 return?
No. The expanded list applies from tax year 2026-27. For income earned up to 31 March 2026, only Delhi, Mumbai, Kolkata and Chennai get the 50% limit.
How is HRA calculated if I change cities mid-year?
Period by period. Work out the exemption for the months in each city using that period's rent, basic plus DA and that city's 50% or 40% cap, then add the results.
Does the metro list matter in the new tax regime?
No. HRA is fully taxable in the new regime, so there is no exemption to calculate. The city only matters in the old regime.