The Centre has confirmed there are no plans to grant Bengaluru “metro city” status for house rent allowance (HRA) exemption, citing a policy to rationalize tax rates. Union Minister of State for Finance Pankaj Choudhary, responding to Rajya Sabha member Ajay Maken’s query, stated, “There is no such proposal. The government’s policy aims to rationalize tax rates and reduce exemptions and deductions.”
Choudhary explained that adding more metro cities and extending higher HRA exemption limits would contradict this policy. According to Rule 2A of the Income-tax Rules, 1962, cities like Mumbai, Kolkata, Delhi, and Chennai have a 50% salary consideration for HRA exemption, while other cities, including Bengaluru, have a 40% limit.
Bengaluru residents have demanded HRA exemption due to rising property values, limited housing supply, increased construction costs, and a shift towards work-from-office mandates. Rents in Bengaluru are now higher than in Kolkata and Chennai.
The Karnataka government increased property guidance values by up to 30% in October 2023. Bengaluru, home to over 5,500 IT/ITES companies and around 750 multinational companies, contributes approximately $85 billion to India’s exports and provides direct employment to over 1.2 million professionals. It accounts for nearly 40% of the country’s software exports and hosts about 40% of India’s Global Capability Centres (GCCs).
Despite these factors, the Centre remains firm on not extending metro city status to Bengaluru.