Amidst the expensive rents and rising costs of urban life, a relief news has emerged for the salary class. The central government is preparing to make a major change in an old rule related to House Rent Allowance (HRA). If the proposal is approved, the in-hand salary of employees living in many big cities of the country may increase and the tax burden will become lighter.
At present, under the old tax system, only salaried taxpayers living in four metros Delhi, Mumbai, Kolkata and Chennai get tax exemption of up to 50 percent on HRA. At the same time, for employees living in all other cities of the country, this limit is fixed at 40 percent.
Which cities can get big benefits?
According to the government’s proposal, now the list of cities with 50 percent HRA exemption can be expanded. There are plans to include Bengaluru, Hyderabad, Pune and Ahmedabad in this. That means, if this change is implemented, then employees living in these cities will also be able to get tax relief equal to that of metropolitan cities like Delhi-Mumbai.
What will be the new proposed framework?
According to the proposal, the new system of HRA exemption could be something like this-
- 50% HRA waiver: Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad
- 40% HRA exemption: All other cities in the country
Why did it become necessary to change the rules?
In the last decade, cities like Bengaluru, Hyderabad and Pune have emerged as major hubs of IT, manufacturing and service sectors. Job opportunities have increased in these cities, but along with this house rents have also increased rapidly. The government believes that it has become necessary to update the HRA rules according to the current urban reality.
Which employees will benefit directly?
This proposal will be especially beneficial for those employees who still choose the old tax regime. In this system, the benefit of exemptions like HRA is available, whereas in the new tax system most of the exemptions including HRA are not available.
What will be the impact on in-hand salary?
Increasing HRA exemption will reduce taxable income, which will directly benefit the monthly in-hand salary of the employees. This change can prove to be a big relief especially for those living in expensive cities like metro.
Latest Business News