Rule 279 limits the exempt special allowance for house rent to the least of the actual allowance received, the rent paid above one-tenth of salary, and 50% of salary in eight named metropolitan cities or 40% elsewhere, for the period the accommodation was occupied.
279
Rules 2026 · Rule 279
Limits for the purposes of Schedule III [Table: Sl. No. 11] to the Act
Rules 261-310
The least of three (sub-rule 1). The amount not included in total income is the least of: (a) the actual allowance received for the relevant period; (b) the amount by which the rent actually paid for the residential accommodation occupied exceeds one-tenth of the salary due for the relevant period; or (c) an amount equal to a percentage of the salary due for that period — 50% where the accommodation is in Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad or Bengaluru, and 40% in any other place.
Definitions (sub-rule 2). The "relevant period" is the period during the tax year for which the accommodation was occupied. "Salary" includes dearness allowance if provided for under the terms of employment, and excludes all other allowances and perquisites.