Hra - rent paid for accomodation in two cities

This query is : Resolved

CA Suraj Lakhotia (Querist)
Follow

11 March 2013 A company pays HRA to an employee "X".

The employee pays rent in two cities.

City 1 - where he stays alone and is his place of posting.
City 2 - where his family stays. He visits this city once a month.

City 1 and 2 are about 500 Kms apart.

Query -

For purposes of HRA exemption,

Whether rent paid in both cities can be clubbed?
If rent for one city is to be considered, which city is to be considered?

Santosh Mishra

Santosh Mishra (Expert)
Follow

11 March 2013 Hi Suraj

Section 10(13A) of Act “any special allowance specifically granted to an assessee by his employer to meet expenditure incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee”

1) Word “occupied” is not further illuminated here but it is common perception that House rent allowance is given by the Employer so that employee can stay close to the office of employers.

2) They have used the word “Residential Accomodation” and not “Residential Accomodation(s). It seems intention is to exempt rent paid for only one accommodation taken on rent by the employee.

Based on above, I think exemption is available in respect of rent paid for one house only ( City 1 )

Please follow the link below to get opinions from some other experts.

https://www.caclubindia.com/experts/hra-exemption-on-two-rented-house-1207424.asp

Message likes : 1 times

CA Suraj Lakhotia

CA Suraj Lakhotia (Querist)
Follow

12 March 2013
It seems perfectly logical that HRA can be claimed in respect of accommodation in city of employment.

However, i was exploring whether HRA can be claimed against both the accommodations.

Santosh Mishra

Santosh Mishra (Expert)
Follow

12 March 2013 I think No, HRA can be claimed only for one accommodation that in city of employment.

Accommodation in City 2 is not "occupied" by the assessee.

There is no provision in Income tax for paying house rent for parents, dependents or any other relatives.

Even he is frequently visiting accommodation at City-2 but it can’t be termed as accommodation “occupied” by the assessee, hence, no exemption available for this house.

Santosh Mishra

Santosh Mishra (Expert)
Follow

12 March 2013 Additionally, HRA can be claimed in respect of only one accommodation taken on rent. Even second house is in same city or in a different city.

CA Suraj Lakhotia

CA Suraj Lakhotia (Querist)
Follow

12 March 2013 I think clause "c" of rule 2A makes things clear where the following is used-

"where such accommodation is" the usage of such and is making it clear that it is for one accomodation only. Also the distinction between metros and non-metros making it distinct that only one would be possible at a time."

Santosh Mishra

Santosh Mishra (Expert)
Follow

12 March 2013 You are right sir.

The word “such accommodation” also makes it clear that there should be only one accommodation.

But Metro and Non-Metro? It is possible that person has taken two rented house in a city defined as Metro

CA Suraj Lakhotia

CA Suraj Lakhotia (Querist)
Follow

12 March 2013 I mean if the act contemplated multiple accommodation, there would be a different formula.

Santosh Mishra

Santosh Mishra (Expert)
Follow

12 March 2013 sir, what do you think? does act consider multiple houses for HRA exemption.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now