Rule 279: Exempt house rent allowance: least-of-three limits
Rule 279 fixes the exempt part of the special allowance for rent (house rent allowance) under Schedule III [Table: Sl. No. 11]. The exemption is the least of three amounts for the relevant period: actual allowance received; rent paid in excess of one-tenth of salary; and 50% of salary for accommodation in Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru, or 40% elsewhere.
Official notified Income-tax Rules, 2026Need advice on Rule 279?
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Bare law
Rule 279 - Limits for the purposes of Schedule III [Table: Sl.No. 11] to the Act
(1) The amount, which is not to be included in the total income of an assessee in respect of the special allowance referred to in Schedule III [Table: Sl.No. 11] to the Act, shall be the least of the following:
(a) the actual amount of such allowance received by the assessee in respect of the relevant period; or
(b) the amount by which the expenditure actually incurred by the assessee in payment of rent in respect of residential accommodation occupied by him exceeds one-tenth of the amount of salary due to the assessee for the relevant period; or
(c) in case of an assessee employed in the location mentioned in column B of the following Table, an amount equal to such percentage of salary, mentioned in column C thereof, due to the assessee in respect of the relevant period:—
Table Sl. No. (A) Location of residential accommodation (B) Percentage of salary (C) 1. Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru. 50% 2. Any other place. 40% (2) In this rule,–
(a) "relevant period" means the period during which the said accommodation was occupied by the assessee during the tax year; and
(b) "salary" includes dearness allowance, if provided for under the terms of employment, but excludes all other allowances and perquisites.
Rule breakdown
Least of three
Actual allowance received for the relevant period.
Rent actually paid for residential accommodation occupied, minus one-tenth of salary for the period.
50% of salary for the eight listed cities, or 40% for any other place.
Definitions: Rule 279(2)
Relevant period: the period during which the accommodation was occupied in the tax year.
Salary: includes dearness allowance if provided for by the terms of employment, but excludes all other allowances and perquisites.
Key takeaways
Least of three
The lowest of the three amounts is exempt.
Eight cities at 50%
Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru.
Salary meaning
Includes DA if part of terms; excludes other allowances.
Practical checklist
- Keep rent receipts and the rent agreement.
- Work out the limits only for the months of occupation.
Avoid
- Do not include allowances other than DA (where part of terms) in salary for HRA.
FAQs
Which cities get the 50% limit?
Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru (Table in Rule 279(1)(c)).
What is "salary" for HRA?
It includes dearness allowance if provided for under the terms of employment, and excludes all other allowances and perquisites (Rule 279(2)(b)).
Is HRA exempt for months I did not rent?
The limits are worked out for the relevant period, which is the period during which the accommodation was occupied in the tax year (Rule 279(2)(a)).
Glossary
- Relevant period
- Period of occupation of the accommodation during the tax year (Rule 279(2)(a)).
- Salary for HRA
- As defined in Rule 279(2)(b).