Is Bengaluru a Metro City for HRA in FY 2025-26? (7-Metro List Explained)
For FY 2025-26, Bengaluru is NOT a metro city for HRA — only Delhi, Mumbai, Kolkata and Chennai qualify for the 50% cap, so Bengaluru renters use 40% under Rule 2A IT Rules 1962. Here is the 7-metro confusion explained with a worked example and the FY 2026-27 transition.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
No — for FY 2025-26 (the return you file now in AY 2026-27), Bengaluru is a non-metro city for HRA, so the exemption cap under Rule 2A IT Rules 1962 is 40% of salary, not 50%. Only Delhi, Mumbai, Kolkata and Chennai qualify for the 50% metro cap under s.10(13A) ITA 1961 read with Rule 2A IT Rules 1962. The "7-metro" list you see in payroll software is a different classification, and carrying it into your income-tax exemption is exactly where thousands of rupees of HRA get lost.
Why the "7-metro" phrase is confusing everyone
There are two different "metro city" lists in Indian payroll, and they serve different purposes:
When a payroll portal or an HR policy calls Bengaluru a "metro," it is usually reading from the second list — the city classification employers use to structure salaries. That list is real, but it is not the list that s.10(13A) and Rule 2A use. The confusion is compounded because some HRA calculators and blogs print "7 metros" as if it were the tax list. For income-tax purposes, in the current filing season, the tax list has 4 cities.
The statutory pins: Section 10(13A) and Rule 2A
Section 10(13A) ITA 1961 exempts house rent allowance to the extent prescribed. The prescription lives in Rule 2A IT Rules 1962, which sets a three-limb test. Your exemption is the least of:
- Actual HRA received from the employer;
- Rent paid minus 10% of salary, where salary means basic + DA that forms part of retirement benefits — not your CTC;
- 50% of salary if the rented accommodation is in a metro city, or 40% of salary otherwise.
Bengaluru's status matters only in limb (3). If your rent-minus-10% or your actual HRA is already the lowest number, the metro/non-metro split changes nothing. But when limb (3) binds — which it does for most high-rent Bengaluru renters — the difference between 40% and 50% is the difference between what you can and cannot exempt.
Metro status by city — FY 2025-26 (the return you file now)
Changed FY 2025-26: nothing in the metro list changed for the FY 2025-26 return — it remains the 4-city list of Delhi, Mumbai, Kolkata and Chennai. Per the firm's CA-confirmed config (confirmed 04-08-2026), the tax list is scheduled to expand to 7 cities — adding Bengaluru, Hyderabad and Pune — effective 1 April 2026, i.e. for FY 2026-27 payroll and returns, not for your FY 2025-26 filing. The exact amending notification number is pending CA insertion and is not stated here. If your payroll already switched Bengaluru to 50% for FY 2026-27, that is correct for next year — but your current-season return still uses 40%.
Worked example: Rahul in Bengaluru, FY 2025-26
Rahul works in Bengaluru and rents a 2BHK in Whitefield. On the old tax regime:
Step 1 — Actual HRA received: ₹2,40,000
Step 2 — Rent paid minus 10% of salary: ₹5,76,000 − (10% × ₹5,00,000) = ₹5,76,000 − ₹50,000 = ₹5,26,000
Step 3 — Limb (3): Bengaluru is non-metro in FY 2025-26, so 40% × ₹5,00,000 = ₹2,00,000
Exemption = the least of the three = ₹2,00,000. The 40% non-metro cap binds.
What if Bengaluru were treated as metro (50%)? 50% × ₹5,00,000 = ₹2,50,000. Exemption = least of (₹2,40,000, ₹5,26,000, ₹2,50,000) = ₹2,40,000 — actual HRA binds.
The metro-status gap for Rahul: ₹40,000 a year of extra exemption. In the 30% slab, that is ₹40,000 × 30% × 1.04 ≈ ₹12,480 in tax saved — for exactly the same rent, same salary, same address, different city label. Run your own numbers in the HRA exemption calculator and select FY 2025-26.
Where employers and calculators get it wrong
- Marking Bengaluru as "metro" in the HRA master data. Payroll sets limb (3) at 50% for Bengaluru, the employer exempts more HRA than Rule 2A allows, and the shortfall surfaces as a demand when the AO recomputes at 40%.
- Copying the structure-city list into the tax list. Bengaluru being a "metro" for DA/city classification does not make it a metro for s.10(13A).
- Ignoring the FY. Some 2026 blogs apply the 7-city expansion to the FY 2025-26 return. It does not apply — that return is governed by the 4-city list.
- Using CTC instead of basic + DA. Even with the correct city, using CTC in limb (2) and (3) inflates the exemption. Only basic + DA (retirement-qualifying) counts.
- Forgetting the new regime. HRA exemption u/s 10(13A) is available only under the old tax regime. Under s.115BAC ITA 1961, HRA is fully taxable and metro status is irrelevant.
FAQ
1. Is Bengaluru a metro city for HRA when I file my FY 2025-26 return?
No. For FY 2025-26, Bengaluru is non-metro and the cap is 40% of salary. Only Delhi, Mumbai, Kolkata and Chennai are metros for that year. Using 50% overstates your exemption.
2. Is the "7-metro" list the tax list?
No for FY 2025-26. The 7-city phrasing comes from employer city classifications for DA and HRA structuring. The income-tax list under Rule 2A has 4 cities for this filing season.
3. When does Bengaluru become a tax metro?
Per the firm's CA-confirmed config, from 1 April 2026 (FY 2026-27), when the list expands to 7 cities. This does not affect your FY 2025-26 return, which still uses 40%.
4. My employer marks Bengaluru as metro and deducts less TDS. What happens?
Your employer's exemption may exceed Rule 2A. The shortfall is not forgiven at filing — the AO recomputes at 40% and raises a demand with interest. Verify the city label in your Form 16 Part B now.
5. I live in Bengaluru but my office is in Mumbai. Which cap applies?
The city where the rented accommodation is situated controls, not your office location. If you rent in Bengaluru, it is 40% for FY 2025-26 even if your employer is in Mumbai.
6. Does the new tax regime change Bengaluru's metro status?
No. Metro status matters only under the old regime where s.10(13A) applies. Under the new regime HRA is fully taxable, so Bengaluru's label is irrelevant to your tax.
7. Where can I check my exact exemption?
Use the HRA exemption calculator (select FY 2025-26) and keep rent receipts and landlord details consistent with the rent you declare — the rent receipt generator formats records including landlord PAN when annual rent exceeds ₹1,00,000 (CBDT Circular 8/2013).
Sources
- s.10(13A) ITA 1961 (HRA exemption; corresponding provision in ITA 2025: Schedule III(11)) — the ITA 2025 mapping reference.
- Rule 2A IT Rules 1962 (three-limb computation; 50% metro / 40% non-metro).
- s.115BAC ITA 1961 (new regime; HRA exemption not available; corresponding provision in ITA 2025: s.202).
- CBDT Circular 8/2013 dated 10.10.2013 (landlord PAN requirement above ₹1,00,000 annual rent).
- Metro-list expansion to 7 cities effective 1 April 2026 per firm config; amending notification number pending.
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