Union budget: Demand for Bengaluru's metro city status for HRA exemption gets louder

Bengaluru has been demanding HRA exemption for the past few years. The Karnataka government increased the guidance value by up to 30 percent from October, 2023. The increase in property guidance values, short supply of housing, rising construction costs, and companies issuing  work-from-office mandates have driven up rentals in the tech capital. A search on many property/real estate portals also revealed that rent in Bengaluru is higher than in cities like Kolkata and Chennai.

Industrialists seek Metro status for Bengaluru

Many industrialists have also urged the government to include Bengaluru on the list of Metros.  Former CFO of Infosys TV Mohandas Pai said:"Only the old presidency towns are still classified as metros, and the government has not expanded the list in 40-50 years. Bengaluru is the third-largest economy and generates more jobs than Kolkata or Chennai. Yet, the government continues to show discrimination towards Bengaluru."

He added that many of the central government regional offices are being set up in these old presidency towns, while Bengaluru is missing out on employment opportunities in these areas. "People from Bengaluru and Hyderabad are often forced to go to places like Chennai to avail of government services".

Also, read: ITR filing 2023-24: How to maximise rent tax benefits, steer clear of pitfalls to avoid I-T notices

Ramesh Chandra Lahoti, President of the Federation of Karnataka Chambers of Commerce & Industry (FKCCI), said: "Bengaluru contributes significantly to the GDP of the country. It is a hub for the IT and ITeS industry and is known as the start-up capital of the country. With newer cities growing and the cost of living being high in these cities, it is necessary for cities like Bengaluru to be considered metro cities under the definition of HRA, which will benefit crores of middle-class taxpayers across Bengaluru."

Also, read: 9 HRA exemption rules you must know to save on taxes

In 2017, an online petition started on Change.org also demanded the same. “According to 'The Constitution (Seventy-Fourth Amendment) Act, 1992,' seven cities (NCR, Mumbai, Kolkata, Bengaluru, Pune, Hyderabad, and Chennai) should be considered metro cities in India. The government has not updated the list of metro cities in India for many decades, which is affecting the common man who pays a significant amount of income tax each year"' said Arpan Kumar, who started the petition.

Bengaluru South MP raises issue in Parliament

In December 2022, BJP leader and Bengaluru South MP Tejasvi Surya urged Sitharaman, who represents Karnataka in the Rajya Sabha, to classify more 'metro cities' under the Income Tax rules.

"This will help more salaried employees living in cities like Bengaluru claim a 50 percent house rent allowance (HRA) deduction," Surya had said. Surya added that a large salaried class lives in cities like Bengaluru, where the cost of housing is high. "It's necessary for other cities to also be considered as metros, which will benefit crores of middle-class taxpayers across the country.

Bengaluru has more than 5,500 IT/ITES companies and around 750 multinational companies, contributing around $ 85 billion to India's exports. It provides direct employment to over 1.2 million professionals and creates over 3.1 million indirect jobs.

Karnataka accounts for nearly 40 percent of the country's software exports, solidifying its status as a global IT powerhouse and the top destination for global capability centres, hosting about 40 percent of India's GCCs.

Also, read: Salaried taxpayers under lens for rent, home loan frauds in I-T returns