Q.Mrs. G is a Central Government employee posted in Bhubaneswar. During the previous year 2025-26 she received: Basic Salary ₹35,000 per month; Dearness Allowance ₹14,000 per month (forming part of salary for retirement benefits); House Rent Allowance ₹6,000 per month (she paid rent of ₹8,000 per month); and Transport Allowance ₹1,600 per month (she is orthopedically handicapped with a disability of the lower extremities). She was also provided rent-free Government accommodation throughout the year, for which the licence fee fixed by the Government is ₹1,200 per month; she pays ₹200 per month towards it. During the year, she paid ₹1,800 as professional tax. Compute Mrs. G's Income from Salary for Assessment Year 2026-27.
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Start your 14-day free trial to unlock the full solution →Step 1 — HRA exemption. "Salary" for HRA = Basic + DA = (₹35,000 + ₹14,000) × 12 = ₹5,88,000. Exemption = least of: actual HRA (₹6,000 × 12 = ₹72,000); rent paid minus 10% of salary (₹8,000 × 12 − 10% × ₹5,88,000 = ₹96,000 − ₹58,800 = ₹37,200); 40% of salary, Bhubaneswar being a non-metro city (40% × ₹5,88,000 = ₹2,35,200). Least = ₹37,200 exempt; taxable HRA = ₹72,000 − ₹37,200 = ₹34,800.
Step 2 — Transport Allowance. Mrs. G is orthopedically handicapped with a disability of the lower extremities, so her exemption ceiling is ₹3,200 per month = ₹38,400 for the year. She received only ₹1,600 × 12 = ₹19,200, which is entirely within this ceiling — so the ENTIRE amount is exempt. Taxable Transport Allowance = ₹NIL.
Step 3 — Rent-free Government accommodation. Value = licence fee minus rent paid by Mrs. G = (₹1,200 − ₹200) × 12 = ₹1,000 × 12 = ₹12,000.
Step 4 — Gross Salary.
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