Worked example for Pune
Take a salaried employee in Pune with ₹6,00,000 annual basic salary, ₹2,40,000 HRA received, and ₹2,40,000 rent paid (₹20,000/month) — under the old tax regime:
- Rule 1 (actual HRA received): ₹2,40,000
- Rule 2 (rent − 10% of basic): ₹1,80,000
- Rule 3 (40% of basic, FY 2025-26): ₹2,40,000
The exempt amount is the least of the three: ₹1,80,000 for FY 2025-26. From FY 2026-27, with Pune reclassified as metro, rule 3 rises to ₹3,00,000 (50% of basic), changing the exempt amount to ₹1,80,000 — a difference of ₹0 in this example, purely from the metro reclassification with no change in salary or rent.
Why this changed
Under Rule 279 of the Income-tax Rules, 2026 (replacing Rule 2A of the 1962 Rules), effective 1 April 2026 (FY 2026-27), Bengaluru, Hyderabad, Pune and Ahmedabad join Delhi, Mumbai, Kolkata and Chennai as HRA metro cities. This applies only under the old tax regime — the new regime has no HRA exemption at all, in any city. If you're filing your July 2026 ITR for FY 2025-26, the old four-city list still applies; the wider list only affects income earned from 1 April 2026 onward.