IT Act 1961 → 2025 / Salaried employees / HRA, LTA and allowances
HRA, LTA and allowances old regime
The main salary allowances that are partly tax-free — available only if you stay in the old regime.
Tax year 2026-27 · Income-tax Act, 2025 as amended by Finance Act 2026 · reviewed 5 November 2026
HRA — Schedule III, Sl. No. 11 and Rule 279
The exempt part is the least of: (a) HRA actually received; (b) rent paid minus 10% of salary; (c) 50% of salary in Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru, or 40% elsewhere. Salary means basic plus DA (where DA counts for retirement benefits).
| Example — Bengaluru | Amount |
|---|---|
| Basic + DA | ₹6,00,000 |
| HRA received | ₹2,40,000 |
| Rent paid (₹25,000 × 12) | ₹3,00,000 |
| (a) HRA received | ₹2,40,000 |
| (b) Rent − 10% of salary | ₹2,40,000 |
| (c) 50% of salary (40% before 2026-27) | ₹3,00,000 (₹2,40,000) |
| Exempt HRA | ₹2,40,000 |
- No exemption if you live in a house you own.
- Keep rent receipts; give the landlord's PAN to your employer if annual rent exceeds ₹1 lakh.
- Rent paid to a parent is allowed if it is genuine and the parent offers it as income; rent to a spouse is commonly challenged.
Rule 279 is in the final Income-tax Rules, 2026 (Notification 22/2026, G.S.R. 198(E)), in force from 1 April 2026; for FY 2025-26 the old 4-metro rule (Rule 2A) applies.
LTA — Schedule III, Sl. No. 8
- Covers the fare only (Rule 278): air — economy fare of any scheduled airline by the shortest route; rail — AC first-class fare; road — first-class/deluxe bus fare, or ₹30 per km where there is no public transport.
- Two journeys in a block of four calendar years — the current block is 2026 to 2029.
- Family: spouse, children (only two born after 1 October 1998) and dependent parents, brothers and sisters.
- No exemption for foreign travel, hotel or food.
Children education and hostel allowance — Schedule III, Sl. No. 13
| Allowance | From 2026-27 | Earlier | New provision | Old provision |
|---|---|---|---|---|
| Children education | ₹3,000 a month per child (max two) | ₹100 | Sch III Sl. No. 13 + Rule 280 | 10(14)(ii), Rule 2BB(2) |
| Hostel expenditure | ₹9,000 a month per child (max two) | ₹300 | Sch III Sl. No. 13 + Rule 280 | 10(14)(ii), Rule 2BB(2) |
| Transport allowance — blind, deaf/mute or orthopaedically disabled employee | ₹15,000 a month + DA (metro), ₹8,000 + DA (others); both regimes | ₹3,200 | Sch III Sl. No. 13 + Rules 2026 | 10(14)(ii), Rule 2BB(2) |
| Transport allowance — transport-sector employees (running allowance) | 70% of the allowance, up to ₹25,000 a month | ₹10,000 | Sch III Sl. No. 13 + Rules 2026 | 10(14)(ii), Rule 2BB(2) |
Limits from the Income-tax Rules, 2026 — final Rules notified by Notification 22/2026, G.S.R. 198(E), in force from 1 April 2026 (tax year 2026-27). For FY 2025-26 and earlier, the Income-tax Rules, 1962 limits apply (₹100 / ₹300 children allowances, ₹50 per meal, ₹5,000 gifts, ₹1,800 / ₹2,400 car, 50% HRA only in Mumbai, Delhi, Kolkata, Chennai).
Under the new regime
Section 202(2)(a)(i) denies HRA (Sl. No. 11) and LTA (Sl. No. 8) outright. Section 202(2)(a)(ii) denies the special allowances in Sl. Nos. 12 (official duty) and 13 (personal, such as children education and hostel), except those prescribed for the new regime.
Frequently asked
How is HRA exemption calculated for 2026-27?
Least of HRA received, rent minus 10% of salary, and 50% of salary (eight cities including Bengaluru, Hyderabad, Pune, Ahmedabad) or 40% elsewhere — Rule 279, old regime only.
What is the LTA block for 2026?
Calendar years 2026–2029; two journeys within India can be claimed.