AN ANALYSIS OF “HOUSE RENT ALLOWANCE” WITH NEW UPDATES
· HOUSE RENT ALLOWANCE(HRA) :-
Where an employer grants any special allowance to his employee, to meet cost of renting an accommodation.
· INCOME TAX ACT, 1961:
Section 10(13A) of the Income Tax Act provides for exemption of HRA based on certain rules. In order to claim HRA exemption, the following basic conditions should be met:
* You should be staying in a rented accommodation.
* The house should not be owned by you or your wife.
*You should be paying the rent.
Minimum of the following three is exempt:
1. Actual HRA received
2. Rent paid minus 10% of Salary
3. 50% of salary if you live in Mumbai, Delhi, Kolkata or Chennai, otherwise 40% of Salary
· MEANS OF SALARY:-
Basic Salary + Dearness Allowance + Commission based on a fixed percentage of turnover achieved by employee.
· IMP. NOTE.(NEW UPDATE):-
As per new circular of CBDT vide its Circular No. 08/2013 F.No. 275/192/2013-IT(B) dated 10.10.2013 if you are a salaried and claiming HRA (House Rent Allowance exemption and the rent paid by you is more than Rs.1 Lakh per year then it is compulsory to provide PAN (Permanent Account Number) of your Landlord. Earlier the limit was capped Rs.15, 000 per month as against the current limit of Rs.8, 333/- per month.
· IF THE PEOPLE WHOSE LANDLORD ARE RELUCTANT TO PROVIDE PAN CARD DETAILS OR LANDLORD DOES’T HAVE A PAN:-
In case a landlord doesn’t have a PAN, then a declaration needs to be filed by the employee by declaring the name, address & details of landlord. It should be duly signed by landlord. In case a landlord’s rental income is assessed in Income Tax then he’ll not refuse to provide PAN. But in case he wants to evade tax by not giving PAN that cannot be allowed as per Income Tax Act. One has following options:
- Provide Declaration
- Pay Rent but do not claim exemption
- Find out a new landlord who provides PAN
There might be cases where employees pay their rent in cash and landlord refuses to provide any rent receipts. In order to avail tax benefits, employees prepare rent receipts themselves and do forge signatures. Also there might be cases where employees actually do not pay any rent but still prepares rent receipts. These all are covered under forgery cases and offences under giving false evidence and fabricating false evidence of IPC (Section 191 & 192). As per judgment by Delhi High Court in such case, an employer can also dismiss the employee for forging the rent receipts.
· IF AN ASSESSEE HAVING HOUSEING LOAN, CAN HE STILL CLAIM FOR TAX EXEMPTION ON HRA? :-
· Well Home Loan and HRA does not have an impact on each other.
If your own home is rented out or you work from another city etc then As long as you are paying rent for an accommodation, you can claim tax benefits on the HRA component of your salary, while also availing tax benefits on your home loan. Please account for any rental income you receive from the property you own under income from House Property.
NOTE:-The new rule is aimed at people claiming HRA exemption for living in their own house. "It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in Rule 2A, qualifies for exemption from income-tax," CBDT said in its circular.