House Rent Allowance exemption depends on actual rent payment, ownership of accommodation, and salary-based ceiling limits. House Rent Allowance exemption is available only when the allowance is granted to meet rent actually paid for residential accommodation occupied by the employee, the accommodation is not owned by the employee, and the employee has incurred real rent expenditure. The exempt amount is the least of the actual allowance received, rent paid in excess of 10% of salary, or 50% of salary in metro cities and 40% in other cities. Salary includes dearness allowance where provided under the terms of employment, but excludes other allowances and perquisites.