House Rent Allowance exemption: inclusion of dearness pay and strict verification of actual rent for tax exemption. The circular clarifies that for computing the house rent allowance exemption the term 'salary' includes dearness pay where it is treated as pay for pension/gratuity and compensatory allowances; employees must have actually incurred rental expenditure and disbursing officers must verify rent payments by receipts. The exempt amount is the least of the prescribed rule based limits (illustrated by examples), and flat rate allowances for certain central employees may be treated as exempt pending rule amendment.