For tax year 2026–27, in working out the exempt part of house rent allowance under the optional regular regime, what does 'salary' include besides basic salary under the Income-tax Rules, 2026?
Question and options
For tax year 2026–27, in working out the exempt part of house rent allowance under the optional regular regime, what does 'salary' include besides basic salary under the Income-tax Rules, 2026?
Dearness allowance and the value of perquisites
Dearness allowance and other cash allowances
Dearness allowance, if the terms of employment provide for it
Dearness allowance, even if not in the employment terms
Answer and explanation
The rule made under Schedule III (Sl. No. 11) to the Income-tax Act, 2025 defines salary for house rent allowance to include dearness allowance only if the terms of employment provide for it, and to exclude all other allowances and perquisites. Dearness allowance not so provided for is therefore left out of the calculation.
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