Salaried taxpayers in Bengaluru, Hyderabad, Pune, and Ahmedabad are set to gain significantly from the latest CBDT draft on Income Tax Rules 2026. By classifying these cities as high-cost rental zones, the proposal upgrades their HRA exemption limit to 50% under the old regime—matching the benefits long enjoyed by Delhi, Mumbai, Kolkata, and Chennai residents.
This shift addresses a long-standing grievance: while basic HRA exemption was 40% elsewhere, escalating rents in these tech and industrial hubs often exceeded that threshold, forcing employees to forgo legitimate deductions.
Beyond housing, the draft overhauls employer perks. Partial private use of company cars now carries higher taxable values—Rs 8,000 monthly for 1.6L engines and Rs 10,000 for bigger ones—compared to the outdated Rs 2,700 and Rs 3,300 caps. This ensures perks reflect current vehicle costs.
Employee-friendly changes include quadrupling tax-free meals to Rs 200 each, boosting gift limits to Rs 15,000 yearly, and raising interest-free loan exemptions to Rs 2 lakh from Rs 20,000. These hikes make fringe benefits more tax-efficient.
Industry bodies in the affected cities welcome the reforms, predicting reduced compliance burdens and higher disposable incomes. With the old regime retaining popularity despite new tax slabs, such targeted exemptions could sway more filers away from the simplified but deduction-less option.
The CBDT’s proactive stance highlights evolving tax policy attuned to India’s dynamic urban landscape, where migration to opportunity cities demands responsive fiscal measures.