Why Bengaluru Is Not Considered A Metro City For HRA Exemptiom?

The long-standing demand to grant Bengaluru 'metro' status under Income Tax rules is likely to remain unfulfilled, according to a report by Bangalore Mirror. The central government has clarified that it cannot add Bengaluru to the list of recognised metro cities in the country.

Bengaluru, often referred to as the Silicon Valley of India, has seen explosive growth in recent decades, becoming a major hub for technology, innovation, and economic activity.
Union Minister of State for Finance, Pankaj Chaudhary, stated that there are no plans to change the current policy or expand the list of metro cities. Under Rule 2A of the Income Tax Rules, 1962, a distinction is made between the cities of Delhi, Mumbai, Chennai, and Kolkata regarding the special allowance for residential accommodation under Section 10(13A) of the Income Tax Act.

For the four designated metropolitan cities, 50% of the salary is considered when computing the exemption limits under section 10(13A). In contrast, for other cities, including Bengaluru, this limit is set at 40%. Minister Chaudhary emphasized that there is no plan to change this policy, stating, "The Government's policy is to rationalize tax rates and move away from exemptions and deductions. Therefore, expanding the list of metro cities and offering higher HRA exemption limits contradicts this policy."

If Bengaluru were included as a metro city, income taxpayers in the city would be able to claim a 50% exemption on salary equivalent to HRA, similar to the benefits available in the existing metro cities.

Earlier in Parliament, Karnataka BJP MP Tejasvi Surya urged Finance Minister Nirmala Sitharaman to include Bengaluru in the metro city list. He highlighted that the city has a significant number of salaried employees, stating, "My city-Bengaluru-has a high number of salaried employees, and I request you to bring the city under the metro cities category."

Surya also emphasized that this move would greatly benefit the middle-class residents of Bengaluru, who, under the current rules, can only claim an HRA deduction of up to 40%. "Including Bengaluru and other growing cities as metros will greatly benefit crores of middle-class taxpayers across the country," he added.