Feb 19, 2008 at 06:01pm IST

Non-metros have higher rents, lower HRAs

Bangalore: The house rent allowance is non-uniform across the country. Residents of metros – Delhi, Mumbai, Chennai and Kolkata – get a higher tax benefit than those in cities like Bangalore or Hyderabad.

However, the rents of Bangalore and Hyderabad are often steeper. Many want a change in this outdated tax law.

“When we were staying in Chennai, rentals were low. We were paying only about Rs 4000. As soon as we shifted to Bangalore, we had to pay Rs 8000, four to five years ago. Now, 10 per cent definitely also impacts,” says a techie, Vivek Tyagi, who now shells out Rs 27,500 every month for his flat in Bangalore’s upscale Indiranagar.

According to Section 10 (13A) of the Income Tax Act, the tax exemption on house rent allowance is 50 per cent of the basic salary for those who live in a metro but only 40 per cent for non-metro residents.

Vivek and his wife Shefali, who've lived in cities like Delhi and Chennai in the past, know that real-estate prices in Bangalore are currently at par if not higher than these metros and they have reason to feel short-changed by the government.

“On the one hand you're paying higher rent here and the deposit, plus you're losing out on the tax difference also with respect to other metros. So if nothing else at least Bangalore HRA tax rule has to be at par with other metros like,” Vivek says.

With real estate prices soaring across many Indian towns, even in NCR’s satellite cities like Noida and Gurgaon, the current yardstick of measuring tax rebates according to the status of metros and non-metros is no longer relevant.

“The government can come up with some sort of cost of living index for the major six or 10 cities and based on that, apply rules which are similar to these cities. In fact, if you see, most of the development has happened in places like Noida and Gurgaon in the last 5-10 years,” Vivek suggests.

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