Maximize Your HRA Benefits: Understanding Metro vs Non-Metro Classification for Tax Exemption in India's Major Cities
Currently, rented accommodations in Delhi, Mumbai, Kolkata, and Chennai are eligible for a 50% HRA exemption. In contrast, other cities, including Bengaluru, receive a 40% exemption. With the increasing population and economic importance of various cities, experts highlight the need to update the classification of metro and non-metro areas.
The Constitution (Seventy-Fourth Amendment) Act of 1992 lists cities like NCR, Mumbai, Kolkata, Bengaluru, Pune, Hyderabad, and Chennai as metro areas. However, cities like Ahmedabad, Surat, and Kanpur, which have also developed significantly, still fall under the 40% exemption category. Due to the lack of updates in tax laws, residents in these rapidly developing cities face higher rents without corresponding tax breaks. Experts advocate for a revision of the HRA tax exemption rules to better support taxpayers in these growing urban centers.
HRA Calculation:
For HRA exemption, the least of the following is considered:
Actual HRA received.
50% of salary for metro city residents (Delhi, Mumbai, Kolkata, Chennai); 40% for non-metro residents.
Rent paid minus 10% of salary.
Metro Cities: Only Delhi, Mumbai, Kolkata, and Chennai qualify. Cities like Noida, Gurgaon, Faridabad, Navi Mumbai, and Thane do not, despite high rents.
Documents Required:
Rent receipts with landlord’s PAN details if annual rent exceeds Rs 1 lakh.
Rental agreement.
These documents need not be uploaded but should be available for verification. False claims can lead to penalties.
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