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For tax year 2026-27, an employee who has opted out of the default regime receives house rent allowance and pays rent for a flat in Delhi. Under the Income-tax Rules, 2026, what share of salary is…

Question and options

For tax year 2026-27, an employee who has opted out of the default regime receives house rent allowance and pays rent for a flat in Delhi. Under the Income-tax Rules, 2026, what share of salary is the city-based limit in computing the exempt HRA?

  1. 30%

  2. 60%

  3. 50%

  4. 40%

Answer and explanation

Correct answer: C - 50%

Rule 279 of the Income-tax Rules, 2026, made for Schedule III (Table item 11) of the Income-tax Act, 2025, sets the city-based limit at 50% of salary for Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad, and 40% elsewhere. The exempt HRA is the least of that limit, the HRA received and rent paid in excess of 10% of salary. The exemption is not available under the default regime.

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