Deduction of HRA is main tool for getting
deduction from Salary for salaried person. Earlier generally, employee get this
deduction on submission of Rent Receipt paid by him to his/her employee. But now
CBDT has made mandatory to provide PAN number of his/her landlord to whom he /
she has paid rent in excess of Rs. 1,00,000.00 (one lac) per annum to his / her
employee. In case non availability of PAN with Land Lord, a declaration to this
effect from the landlord alongwith the name and address of property should be
filed by the employee.
Some important question answers are given below
for more clarity :-
Q. What is
objective to claim exemption for House Rent Allowance? under Sec.10
(13A).
A. To meet
expenditure actually incurred by an employee on account of payment of rent in
respect of residential accommodation.
Q. Which
section HRA exemption has been granted?
A. Section
10(13A) of the Income Tax Act,1961 provides for the exemption from HRA.
Q. What are
condition to claim exemption?
A. An
employee must fulfill following conditions to avail exemption:-
He/she must stay in rented House during the
period for which claiming exemption i.e. he/she does not stay in own house
(property in his/her name)
He/she must have actually incurred expenditure
for payment of rent.
Q. How shall
exemption from HRA be calculated?
A.
Calculation of HRA exemption is regulated by the Rule 2A of the Income tax
Rules, 1962 which says that minimum amount of the following three shall be
exempt :-
(a) Actual amount of HRA received,
(b) Rent actually paid minus 10% of
salary
(c) 50% of salary if stayed in
Delhi/Mumbai/Chennai/Kolkata or 40% of salary if stayed in other place.
Q. If HRA
received during the Financial year is more than the least of amount calculated,
what would be consequence?
A. Excess
amount shall be taxable and be treated as part of gross salary.
Q. What does
mean by salary for the calculation of HRA exemption?
A. It
includes three components (i) Basic Salary, (ii)DA if considered for Retirement
purposes and (iii)Commission forming part of Salary as a Fixed Percentage of
Turnover achieved by the employee.
Q. What will
happen if employee stayed in two places during the financial year?
A. If he
stays in two different places in same city, nothing will change however if he
stay in different cities, it may affect if staying in
Delhi/Mumbai/Chennai/Kolkat for one period and in other place for other
period.
Q. What will
happen if employee pays rent less than 10% of his salary?
A. Whole of
the HRA amount received will be taxable.
Q. If place
of stay is different from place of employment, how HRA exemption shall be
calculated?
A. The exemption must be calculated on the
basis of the place where residential accommodation is situated because HRA
exemption is for expenditure actually incurred for Rent even in relation the
employment.
Q. HRA
exemption should be calculated on monthly basis or for whole of the
year?
A. Exemption is for the period in which rental
expenditure actually incurred and rental accommodation is occupied by the
employee during the financial year therefore if there is no change in place or
rent paid during the year, it can be calculated for whole year but if there is a
change in any of the two during the year then it must be calculated on monthly
basis and for the month in which rental accommodation occupied by the
employee.
Further calculation of HRA exemption depends
upon Salary or HRA actually received also thus if there is any change in salary
or HRA amount in the period it must be calculated separately for that
period.
Q. If
employee stay at parent house, can he claim exemption for HRA?
A. Yes, if he paid the rent actually to his
parent.
Q. What
will happen if employee is paying rent to his/her spouse?
A.
Relationship of husband-wife is not supposed to be commercial therefore it is
better that no exemption should be claimed in such transaction.
Q. Do
employee need to submit any proof for payment of rent to claim HRA
exemption?
A. Payment of actual rent is pre requisite for
claiming HRA exemption and Assessing Authority may ask for proof of payment at
the time of regular assessment but employee drawing HRA upto Rs.3000/- per month
shall be exempted from production of rent receipt while submitting his claim to
employer.
Q. Whether
exemption of HRA is part deduction allowed u/s 80C?
A. No, HRA
exemption is different from deduction u/s 80C and it does not be included in the
amount eligible for deduction u/s 80C.
Q. Can an
employee avail tax benefit of HRA and Home loan both together?
A. Yes, Tax
treatment of both is under different sections and both can be availed
simultaneously.
Resource:-
(i) Section 10(13A) read with Rule 2A of the
Income Tax Act,1961
(ii) Circular : No. 90 [F. No. 275/79/72-ITJ],
dated 26-6-1972 by CBDT
(iii) Letter : F. No. 12/19/64- IT(A-I), dated
2-1-1967 By CBDT
(iv) Circular : No. 9/2003, dated
18-11-2003/[Para 5.2-(9)].
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