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Hra exemption for salary income


pooja (taxpracticing)     13 April 2021

pooja
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hello everyone....can a person take exemption of HRA if he paying rent to his grandfather ...by showing as tenants and landlord relationships
please answer...thank you
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Sourav

Sourav (Student)     13 April 2021

Sourav
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No it is not valid as per IT act and you cannot claim HRA in this case
pooja

pooja (taxpracticing)     13 April 2021

pooja
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Ok thank you sir
Prathyusha Varma

Prathyusha Varma (ArticleShip)     13 April 2021

Prathyusha Varma
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Yes you claim exemption but your grandfather has to show as income
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Sourav

Sourav (Student)     13 April 2021

Sourav
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But how can it happen as it is under relative and there is no employer employee relationship
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Prathyusha Varma

Prathyusha Varma (ArticleShip)     13 April 2021

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As per act we need to pay rent. It may be to anyone. Why we nned employee or employer relationship here completely irrelevant

 

 

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Sourav

Sourav (Student)     13 April 2021

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House Rent Allowance is a subset of an employee’s salary which is provided to cover the cost of accommodation up to a certain percent. As the employee would be spending this amount on accommodation, the government does not expect the employee to pay tax on this amount and the employee can claim a tax exemption for the HRA amount.

As per the prevailing rules, HRA exemption can be claimed for the following amounts:

On the actual HRA received.
Balance of rent paid over 10% of the employee’s total salary.
Up to 50% of the salary if the employee resides in Mumbai, Delhi, Kolkata or Chennai. The percentage is 40% for other cities.

House Rent Allowance (HRA) is given by an employer to his/her employees to meet rental expenses. The HRA is taxed under the head ‘Income from Salaries’. The HRA is designed to give the employee tax benefits for meeting accommodation expenses. The HRA is given only to salaried employees, self-employed individuals may not claim for HRA. The HRA is regulated by Section 10(13A) of the Income Tax Act. A part of the HRA is exempt from taxes through provisions in Section 10(13A). The taxable income of the individual is determined by deducting the HRA exemption from the total income of the individual. The HRA is fully taxable if the employee is not staying in a rented accommodation.

HRA exemption is only applicable to salaried individuals who have HRA as a component of their salary and are residing in a rented accommodation. Self-employed professionals are not eligible for the tax benefit on HRA.

And being the main part..

Rent being paid to family members
The person claiming the tax benefit should not own the premises being rented out. If an individual is paying rent to his/her parents, he/she may claim a tax deduction on HRA. But, the assessee may not claim a deduction of HRA is he/she is paying rent to his/her spouse. Due to the nature of a marital relationship it is considered that the individual will be renting the property out with his/her spouse.
Prathyusha Varma

Prathyusha Varma (ArticleShip)     13 April 2021

Prathyusha Varma
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You have the answer in it...pooja is paying to grandfather not spouse 

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Sourav

Sourav (Student)     13 April 2021

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I know but if AO claims it as relative transactions then it might be disallowed
Ankit Neema

Ankit Neema   14 April 2021

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AO does not allowed the if the same is reasonable, Mr. Sourav Please tell where you read that exp. paid to Relative is disallowed, if unreasonable then such exp is disallowed,
if I am paying reasonable rent then the same is allowed.
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Sourav

Sourav (Student)     14 April 2021

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I know that paying to relatives are allowed but in specific cases it may be disallowed.

Section 40A(2): Disallowance of expense on Payments to Relatives
Section 40A(2) provides power to the Income Tax Officer that in case any expenditure has been incurred and the payment has been made or is to be made to certain specified persons and he is of the opinion that such expenditure is excessive or unreasonable with regard to the fair market value of the goods, services or facilities provided, he may disallow such expense as he considers to be excessive or unreasonable.
Therefore, for an amount to be disallowed as an expense under Section 40A(2), the following 3 conditions are to be satisfied:-

The payment is in respect of any expenditure
The payment has been made or is to be made to a specified person in respect of such expenditure
The payment for the expenditure is considered excessive or unreasonable having regard to the fair market value of the goods, services or facilities provided.
If all the above conditions are fulfilled, the Income Tax Officer can disallow the expenditure to the extent he considers it excessive or unreasonable.

Specified Persons for the purpose of Section 40A(2)
The specified persons for different categories of taxpayers for the purpose of Section 40A(2) are as under:-

Category of
Taxpayer Specified Persons
1. Individual a. Any Relative;
b. Any person in whose buinsess or profession, the individual himself or his
relative has substancial interest
Prathyusha Varma

Prathyusha Varma (ArticleShip)     14 April 2021

Prathyusha Varma
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Yes business expense for relatives are disallowed but not hra
SUSHANT BIDAYE

SUSHANT BIDAYE   14 April 2021

SUSHANT BIDAYE

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In my opinion, rent paid to grandfather can be claimed for HRA exemption, if the property is owned by grandfather.

also for safer side, make an agreement and pay rent month to month.

of course grandfather has to treat it as taxable income in his hands
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david d

david d   14 April 2021

What about taxes on books? Can i start a business of books? like this online Read light novels

Susmita Dutta, CA , CPA

Susmita Dutta, CA , CPA (CA )     14 April 2021

Susmita Dutta, CA , CPA
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Yes, one can pay rent to his/her grandfather  provided he should have a rental agreement and  every month rental payment proof .

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