Income Tax treatment of incentives as housing benefits in li

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CPA Partha Sengupta (Querist)
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09 November 2008 Hi all,

Kindly resolve the following query and specify the relevant provisions of I.Tax Act if any as applicable:

Problem:
An educational institute has offered incentive as housing benefits in lieu of HRA to the officers of higher rank on graded basis. The entity has issued a circular wherein it has stated that incentive shall be taxable as per income-tax rules. Please note the following situation/condition as these are relevant in respect of this problem:
1. The offer is optional (either HRA or Incentive can be chosen by the employee)
2. The institute is exempted from paying Income Tax and not eligible for payment of fringe benefit tax.
3. The said institute is an autonomous body under GOI.

Questions/Query:
In view of the above problem, following questions are given:

1. Is incentive in lieu of HRA is fully taxable?
2. Can the employee avail relief on incentive amount [as per section 10 (13A) of the Income Tax Act, 1961]?
3. What will be the tax treatment of incentive as per I.Tax Act?
4. Whether TDS @10%, 20% or 30% (depending on taxable income of the employee) as applicable is to be deducted from monthly incentive amount?
5. Can incentive be treated just like as HRA for income tax purpose?
6. What will be the tax treatment for a particular month if an employee receiving party incentive and partly HRA in the same month, due to implementation of incentive in the middle of a the month?

Thanks in advance.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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10 November 2008 1)What do you mean by housing incentive?
2) To avail HRA benefit, there has to be HRA.
3),4),5)and 6)Answer depends upon answer to 1.

CPA Partha Sengupta

CPA Partha Sengupta (Querist)
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11 November 2008 To
S.Srinivasaraghavan,
Sir,

As desired by you, I am explaining the term housing incentive. In terms of office order it is written therein that incentives as Housing Benefits will be paid to Officers on graded basis in liue of HRA for which no receipt would be required to be produced. However, the incentive sahll be taxable as per income-tax rules. The employee claiming this incentive will not be eligible for HRA. Now, sir kindly resolve my query.
Thanks.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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11 November 2008 The very fact they are in lieu of HRA clearly shows that they are not HRA. If no HRA is paid, the benefit of HRA can not also be availed.

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