1. The HRA Revolution: New Cities Join the 50% Club

For years, only Delhi, Mumbai, Kolkata, and Chennai qualified for higher metro HRA exemptions. The draft rules now recognize the rapid growth and rising housing costs of other major cities.

Proposed Additions:

• Bengaluru
• Hyderabad
• Pune
• Ahmedabad

Employees living in these cities under the Old Tax Regime may now claim a larger portion of their basic salary as tax-free HRA, leading to direct savings.

2. Education & Hostel Allowances Get a Major Upgrade

Child-related allowances finally reflect real-world education costs, replacing decades-old limits.

These increases align tax benefits with modern schooling and hostel expenses, providing meaningful relief to families.

3. Relief for Employees with Disabilities

The handicapped transport allowance receives a substantial boost:

• Current: ₹3,200 per month
• Proposed: ₹15,000 + DA (metros)
• ₹8,000 + DA (other cities)

This change better supports commuting needs and encourages workplace inclusivity.

The Bottom Line

Although these rules are still in draft form, they indicate a clear shift toward aligning tax benefits with today’s cost realities. Salaried individuals following the Old Tax Regime could see noticeable reductions in taxable income if implemented.