1. Reference is invited to the Board’s letter No. 12/19/64-IT(B), dated 8-1-1965, addressed to all State Governments. A question has been raised whether the house rent allowance at flat rates sanctioned to Central Government servants without verification of rent receipts vide the Ministry of Finance (Department of Expenditure) O.M. No. 2(22) E-II/60, dated 2-8-1960, will be exempt from tax under section 10(13A) read with rule 2A of the Rules or it is necessary for the Disbursing Officers to verify in each case whether the employee has paid house rent and the allowance exempted is less than the difference between the actual expenditure on house rent and 10 per cent of the salary?
2. The Board have decided that in the case of Central Government employees who are in receipt of house rent allowance at flat rates and who are not residing in their own house or in the house of their parents, the allowance at the flat rates so received may be treated as exempt from income-tax under section 10(13A) without further verification. Necessary amendment to the rules is being made accordingly but pending this amendment there is no objection to Disbursing Officers ignoring such house rent allowance while calculating the tax to be deducted at source during the current financial year.
Letter : F. No. 12/19/64-IT(B), dated 22-2-1966.