As announced in budget 2020, taxpayers who wish to opt for the New Income Tax Regime from AY 2021-2022 can not claim the exemption of House Rent Allowance.
Few days back (on 13th Nov 2013), I posted an article on exemption from house Rent allowance “House Rent Allowance-A tool of Tax planning for employees” Really I feel very happy to see the responses to the article and good to know that people are so curious and having an appetite for knowledge.
This is the link who wants to read it if not read:
House Rent Allowance - A Tool of tax planning for employees
As comment box does not permit me to write and summaries all queries in one set that’s why on the basis of queries and comments which I have received I am trying to include some more questions and their answers for sharing purpose and would appreciate if I get more queries:-
Q-1:- one of our client is providing rent free accommodation to its employees, one of the employee's family is out of state, he is receiving HRA, also paying Rent for house out of state occupied by his family,in this case can he claim HRA exemption?
A-1:- Generally HRA is allowed for the place where employee is rendering service however there is no restriction ‘as such’ has been imposed in any provisions thus it may be claimed
Q-2:- If relationship of husband wife is not supposed to be commercial then do relationship with parents is supposed commercial? One of reader raised this objection.
A-2:- It’s true that in family it is not supposed to have commercial relations but when law creates some such fictions (for example HUFs, ) transactions between such entities may be commercial. Recently in one of case by ITAT Ahmedabad , even rent paid to wife has also been allowed but still it is my understanding that such tax planning should not be promoted because it may lead litigation and it is ITAT decision also which will not have jurisdiction in other AO.
Q-3:- In case the employee has worked in multiple companies in the current financial year and his monthly rent is Rs.9000/-. Is it mandatory for the employee to furnish landlord's PAN to to each employer?
A-3:- Not to each employer, he will have to furnish where he ill ask for exemption for the rent more than Rs. one Lakhs.
Q-4:- what will be the scenario if any land lord denies giving pan in normal case too?
A-4:- Employer will deduct more TDS and then employee will have to file for refund by claiming exemption while filing his ITR for the relevant year.
Q-5:- If parents are Senior Citizen ( reader wants to say that when rent is paid to parent ) and don't file ITR then in that case what would be done? A-5:- If parent have PAN they can furnish it or may furnish declaration for not having PAN and employee will get exemption through employer. There is no need to file ITR by parent if their total income does not exceed the maximum taxable limit.
Q-6:- If an assessee stays with his/her parents, but for Income Tax benefit it is shown that rent is paid to parents. Properly payment is made through bank, in this case whether an assessee can get an exemption u/s 10 (13A)?
A-6:- Yes, he will get exemption but he must furnish rent receipt and rent deed also .
Q-7:- I would like to know from when is Circular No : 08/2013 dated 10th Oct 2013 applicable.
A-7:- This Circular No : 08/2013 dated 10th Oct 2013 is related to TDS on Salary and applicable for FY 2013-14 (AY 2014-15) thus it is applicable for the transaction happened from 1st April 2013 to 31st March 2014. i.e. applicable from 1.4.2013
Q-8:- My HRA component is Rs. 10,000/- per month and I stay with parents in a rented house and rent is borne by my father. If I have to show as if I am paying rent to my father, do we need a separate agreement for that ?. And if only Rs. 1,00,000/- for the entire year can be claimed, is it possible for us to claim Rs. 10,000/- per month up to September end and thereafter keeping the above rule in view, since earlier the limit used to be Rs. 14,999/- per month. Please guide.
A-8:- As you stay with your father and he himself staying in rented house , I would not suggest to pay rent to father. One more thing I want to make clear that threshold limit of Rs.100000/- is not for claiming exemption but it is limit where your employer will insist you to furnish PAN of landlord and in case of non furnishing he will deduct more TDS. second this threshold limit would be applicable w.e.f 1st April 2013 as circular has been issued for FY 2013-14 thus no need to bifurcate rent into two periods.
Q-9:- What if when employer has not given exemption benefit of HRA since employee was not able to produce Rent slip. and tax was deducted by employer. Can employee claim exemption of HRA and claim refund?
A-9:- Exemption may be claimed while filing your ITR as circular is related to TDS to be deducted by employer. No circular can override the relief given by the law itself. yes you can claim refund.
Q-10:- I want to know if rent is paid to parents then also a rent receipts is required.
A-10:- yes rent receipt and rent deed both should be furnished to your employer.
Q-11:- Suppose my parents have own registered flat in their joint names and full payment has been made by father. Can rent be paid to mother considering there is nothing contributed from his account into the flat.
A-11:- Even house is in joint name but see who is the real owner. I understand that it is your father who actually bore the cost. we must consider the concept of “substance over form”. That’s why I believe that father should be treated as owner. It is not advisable to pay full rent to mother only, it may lead litigation.
Can be reached at:
CA CHANDRA KISHORE BAJPAI
M.Com, FCA, DISA(ICAI),
Certificate in International Tax (ICAI)
cackbajpai@gmail.com, http://ckb.co.in
CAclubindia
