The aspiration for Bengaluru to be classified as a ‘metro’ city under Income Tax rules appears to be fading. Recent reports from Bangalore Mirror reveal that the central government has no intention of including Bengaluru in the list of metro cities, which currently comprises Delhi, Mumbai, Chennai, and Kolkata.
Union Minister of State for Finance, Pankaj Chaudhary, has confirmed that there are no plans to alter the existing policy or add new cities to the metro category. This decision impacts the potential benefits that Bengaluru’s residents might have received if the city were to be included in the metro list.
Current Policy and Its Implications
Under Rule 2A of the Income Tax Rules, 1962, specific tax benefits are allocated to residents of metro cities. The special allowance for residential accommodation, as outlined in Section 10(13A) of the Income Tax Act, provides a significant tax relief. For individuals residing in the recognised metro cities, the exemption on House Rent Allowance (HRA) is set at 50% of their salary. This provision is designed to ease the financial burden of living in high-cost urban areas.
For Bengaluru to gain the same benefits, it would need to be officially recognised as a metro city. However, with the central government’s recent clarification, this change seems unlikely in the near future. If Bengaluru were included, income taxpayers in the city would have been eligible to claim a 50% exemption on their HRA, aligning with the other metro cities.
Parliamentary Appeal for Change
The issue was brought to the forefront in Parliament by Karnataka BJP MP Tejasvi Surya. During discussions, Surya urged Finance Minister Nirmala Sitharaman to consider adding Bengaluru to the list of metro cities. He highlighted the plight of middle-class taxpayers in the city, who are currently disadvantaged compared to their counterparts in recognised metro areas.
Surya articulated the concerns of Bengaluru’s salaried employees, stating, “Salaried middle-class people of this country have a major concern. Under the current income tax rules, only four cities fall under metro cities and those are Delhi, Mumbai, Kolkata, and Chennai. My city—Bengaluru—has a high number of salaried employees and I request you to bring the city under metro cities.”
The MP further emphasised that the inclusion of Bengaluru and other growing cities in the metro category would provide substantial relief to the middle class. “Residents of big cities like Bengaluru can claim HRA deduction up to 40 per cent only under existing rules. Including Bengaluru and new growing cities as metros will greatly benefit crores of middle-class taxpayers across the country,” Surya added.
Impact on Middle-Class Taxpayers
The exclusion of Bengaluru from the metro city list means that residents will continue to face higher living costs with less financial relief compared to those in the four recognised metro cities. The current cap on HRA deduction stands at 40%, which is significantly lower than the 50% allowed in the metro cities.
As Bengaluru continues to grow and evolve, the demand for its inclusion in the metro list is likely to persist. However, with the central government’s recent stance, it appears that any change in policy regarding the inclusion of new metro cities will not be forthcoming in the immediate future.
Conclusion
The long-standing demand to grant Bengaluru metro status for income tax purposes remains unmet. Despite vocal appeals from local MPs and the evident need for financial relief among Bengaluru’s residents, the central government has decided to maintain the status quo. As a result, the city’s taxpayers will have to continue navigating the current tax regulations without the additional benefits afforded to residents of the officially recognised metro cities.