Salary Rules From April 2026: 50% HRA Cities, Meals and Gifts

The Income-tax Rules, 2026 came into force on 1 April 2026 along with the Income-tax Act, 2025. They rewrote the limits that decide how much of your salary package is taxed. Several had not moved in decades: the ₹50 meal limit and the ₹100 a month children's education allowance were set long ago.

The changes apply to salary for Tax Year 2026-27 (April 2026 to March 2027), the return for which you file in 2027. Your return for AY 2026-27 (FY 2025-26), filed in 2026, still uses the old figures from the Income-tax Rules, 1962.

The changes at a glance

"Old regime only" means the item is an exemption that the new tax regime under section 202 does not allow, just as the old section 115BAC did not. The new section numbers for 115BAC and the deductions are listed in 80C, 80D and 87A under the 2025 Act. "Valuation rule" means the item decides the taxable value of a perquisite under rule 15, which applies to your salary whichever regime you are in.

HRA: four more cities at 50%, under the old regime only

Rule 279 now sets the HRA limit at 50% of salary for Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru, and 40% everywhere else. "Salary" here means basic pay plus dearness allowance where your terms of employment provide for it, and excludes other allowances and perquisites.

The exemption is the least of three amounts:

1. the HRA actually received
2. rent paid minus 10% of salary
3. 50% of salary in the eight cities, 40% elsewhere

This only matters if you choose the old regime. The new regime, which is the default for Tax Year 2026-27, gives no HRA exemption at all, so moving Pune into the 50% list changes nothing for someone on the new regime. If you want the old regime, you tell your employer at the start of the year and confirm the choice in your return; see old vs new regime to check which works for you.

Worked example: a Bengaluru tenant

Basic pay is ₹60,000 a month (₹7,20,000 a year), HRA received is ₹30,000 a month (₹3,60,000), and rent paid is ₹35,000 a month (₹4,20,000). No DA.

The exemption rises by ₹60,000. At the 30% slab plus 4% cess, that is ₹18,720 less tax for the year, under the old regime. If your rent is low relative to salary, the "rent minus 10%" line is the smallest and the city change makes no difference, so work it through with your own numbers.

Your HRA claim goes to your employer in Form 124, the successor of Form 12BB. You give the landlord's name and address, and the landlord's PAN if rent for the year is above ₹1,00,000. Form 124 now also asks for the landlord's Aadhaar number and your relationship with the landlord, if any.

Meals: ₹200 per meal

Rule 15 values free food and non-alcoholic drinks from your employer at nil up to ₹200 per meal, where they are given during working hours at the office, or through paid vouchers usable only at eating places. The old limit was ₹50. Tea and snacks in working hours, and food in a remote area or offshore site, stay outside the perquisite altogether.

A worked example: one meal voucher of ₹200 on each of 22 working days is ₹4,400 a month, or ₹52,800 a year, with no taxable perquisite. Under the old ₹50 limit, only ₹13,200 a year of the same vouchers would have been tax-free. Since this is a valuation rule, it holds under the new regime too, which makes meal cards one of the few structures still useful there. Anything above ₹200 a meal is taxable as a perquisite.

Gifts: nil below ₹15,000 a year

A gift, voucher or token from your employer, on a festival or otherwise, has nil taxable value if the total for the tax year is below ₹15,000. The old limit was ₹5,000. If the total crosses ₹15,000, the rule makes the whole amount the perquisite value, so ₹16,000 of vouchers is ₹16,000 of taxable salary.

Loans, cars and education: the other rule 15 changes

• Loans. An interest-free or concessional loan from your employer is not a perquisite if loans total up to ₹2,00,000, or if the loan is for treatment of a disease listed in rule 18. Above that, the benefit is valued at SBI's lending rate for the same purpose on 1 April, on the maximum monthly balance, minus interest you pay.
• Company cars. If your employer's car is used partly for your personal use and the employer pays running costs, the monthly perquisite is now ₹5,000 for an engine up to 1.6 litres or an electric car, and ₹7,000 above 1.6 litres, plus ₹3,000 if a driver is provided. With a driver and a small car, that is ₹96,000 of taxable salary a year, up from ₹32,400. This change increases tax.
• Education at a school run by your employer. The perquisite applies only where the benefit per child exceeds ₹3,000 a month (it was ₹1,000).
• Specified employee. Some perquisites, such as free utilities, are taxed only for "specified employees". The salary threshold for that is now ₹4,00,000 under rule 17; it was ₹50,000.

Allowances under the old regime

Rule 280 lists allowances that are exempt up to fixed limits. Apart from education and hostel allowances, transport allowance for an employee who is blind, deaf and mute or has an orthopaedic disability of the limbs is now ₹15,000 a month in metro cities and ₹8,000 elsewhere, plus DA. Treat these limits as relevant only if you pick the old regime, and ask your employer how each allowance is treated under the new one.

What to ask your employer

1. Ask HR whether the payroll for Tax Year 2026-27 uses the new limits. Payroll software that still applies ₹50 per meal or ₹5,000 for gifts will over-tax you.
2. If you are on the old regime, check that your HRA calculation uses 50% for the new cities.
3. If you have a company car, expect a higher perquisite on your payslip from April 2026.
4. Check the perquisite values in your annual statement. Employers give details of perquisites in Form 123 (formerly Form 12BA) where salary exceeds ₹1,50,000.

Frequently asked questions

Does the 50% HRA rule for Bengaluru apply under the new regime?

No. The new regime under section 202 does not allow the HRA exemption, so the city list matters only for people who opt for the old regime.

Can I claim the new HRA limit in my return for AY 2026-27?

No. That return covers FY 2025-26 and uses the Income-tax Rules, 1962, under which only Mumbai, Delhi, Kolkata and Chennai get 50%. The new list applies from Tax Year 2026-27.

Are meal vouchers tax-free under the new regime?

Up to ₹200 per meal, yes. The limit sets the value of the perquisite under rule 15, and perquisites are valued the same way in both regimes.

My employer gave me a ₹20,000 Diwali voucher. How much is taxable?

All ₹20,000. The nil value applies only when the year's gifts and vouchers total less than ₹15,000.

Sources

• Income-tax Rules, 2026 (rules 15, 17, 18, 204, 205, 279 and 280), notified 20 March 2026
• Latest news on the e-filing portal: Income-tax Rules, 2026 notified, effective 1 April 2026