HRA Exemption available or Not.

This query is : Resolved

CA Abhishek Singh (Querist)
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15 January 2011 One of our client a salaried employee has owned residential house property in Bahayander (E), which comes in Thane District of Maharashtra.

He is doing job in Mumbai at Andheri (west). he is showing his owned flat as vacant and is claiming HRA exemption by showing rent paid at Andheri.

Is it allowed as per law.

i think showing rent from his owned house (say rs.2500) and the showing rent paid (Rs.10000) will be better way to save tax than that adopted by the assessee.

CA Sanat Pyne

CA Sanat Pyne (Expert)
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15 January 2011 Section 10(13A) requires 2 conditions for claiming HRA exemptions:

1. The residential accommodation occupied by the assessee should not be owned by himself; and

2. The assessee has actually incurred expenditure on payment of rent in respect of the Residential accommodation occupied by him.

Annual Value of Self Occupied Property as per Section 23(2):

property is in the occupation of the owner for the purpose of his own residence; or
cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, the annual value of such house or part of the house shall be taken to be NIL.

Deduction for interest as per Section 24(b):

where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital

After going through the above section it is clear that both the deductions can be taken simultaneously if all the conditions mentioned in above sections are fulfilled. Moreover, there is no provision which is prohibiting the deduction and exemption. The Delhi High Court in the case of CIT v. Mr. Justice Avadh Behari Rohtagi [1986] 157 ITR 441 held that the word used is “any other place” so if any person has taken any house on the rent and at the same time he is also having the house property in the same city deduction in both should be allowed as there is no provision which is prohibiting the same.

So It is concluded that if a person has a house property and he is also paying the rent for any house property in the same city but at different place then he will be able to get HRA exemption u/s 10(13A) and Interest deduction u/s 24(b)

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CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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15 January 2011 For claiming HRA exemption the following criteria need to be checked

1. Assessee has to stay in rented house
2. Asseessee need to pay rent

so your client staying rented house, he is eligible for claiming HRA

in case of own house if the house is situated in different city and assessee not stayed in that house due to employment reasons that house can be treated as self occupied and tax treatment accordingly u/s.23(2)(b)

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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15 January 2011 Agree with experts

CA Sanat Pyne

CA Sanat Pyne (Expert)
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15 January 2011 Before agree with other expert, read all experts reply.dont do that just to earn point. whatever i have written, is according to the law. if you have the expertise knowledge to add value with your answer,then give your reply.Dont give unnecessary reply just to earn points.