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HRA - Something New

Nitin Jogad (Audit & Assurance) (52 Points)

15 February 2010

Dear Sir

I have a query a company pays HRA to an employee , who resides in bangalore.

For exemption employee gives rent recipts of Kochi as his Mother & Brother Stays there is it valid to consider Rent recipts of kochi , the rent amount paid at kochi is 20000/-. And he says he is doing so , many years with previous employers .

If its not valid so if I do the same considering his request wat will be the consequences.

Pls reply asap.

Thanks in Advance

Nitin.

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14 Replies

Ashish Sharma (Service) (1028 Points)
Replied 15 February 2010

As per 10(13A) any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee, to such extent as may be prescribed having regard to the area or place in which such accommodation is situate and other relevant considerations; Explanation : For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where - (a) The residential accommodation occupied by the assessee is owned by him; or (b) The assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him;

So as per the act the accommodation should occupied by the assesseee not by any family member.

Divya.M (CA Final Student) (274 Points)
Replied 15 February 2010

ya ashish Sharma is right. it is Accomodation occupied by the assess

Sushmita (Finance Officer) (142 Points)
Replied 15 February 2010

Nitin,

You can claim exemption for the rent paid to your mother, provided you actually pay the rent. You should get rent receipts for the same. Also, your mother & brother would need to declare this income in their IT returns.

Amir (Learner) (4016 Points)
Replied 15 February 2010

Dear Nitin,

I agree with friend Ashish that for claiming HRA house should be occupied by the assessee himself only & not on his behalf by his family...

Further the purpose of HRA is to put an employee close to his work place & claiming the exemption of a House which is located in alltogether different city would defeat this very purpose of HRA.

Venkat M (FCA) (133 Points)
Replied 15 February 2010

Mr.Amir is correct.

Nitin Jogad (Audit & Assurance) (52 Points)
Replied 15 February 2010

Thanx a Ton ....4 ur concern.....

Suresh.B (Finance Executive) (24 Points)
Replied 16 February 2010

Could you please any one clarify that What Should be the Maximum amount of HRA can be paid to the employee by the employer (i.e.50% or 60% of Basic pay) or any specified limit ?

Thanks & Best Regards,

Suresh.B

Amir (Learner) (4016 Points)
Replied 16 February 2010

Dear Suresh,

There is no limit as such prescribed anywhere with respect to payment..

Only thing is amount exceeding following limits will be taxable -

1) 50% of (Basic + DA+ Commission based on Turnover) in case of 4 Metro Cities.........

2) 40% of (Basic + DA+ Commission based on Turnover) in case of other cities.....

The above amount shall also be compared with Rent paid - 10%( Basic + DA+ Commission based on Turnover) for the purposes of determining exemption.

Nitin Jogad (Audit & Assurance) (52 Points)
Replied 16 February 2010

This is what he has mailed me : can somebody help me over this...????

" I understand that as per 10(13 A) the payment of rent is with respect to residential accommodation occupied by the assessee. As you can see, the rental agreement is my name, which means that I am occupying this property from the date mentioned in the agreement. I do not think that it is required for me to be physically living out of that house around the year to fulfill the clause. The address of the house in the rental agreement is my current residential address and is used so for any formal documents that I produce, and it is where I stay whenever I am home.

I think in light of this there should be not be an issue in fulfilling the requirements mentioned in clause 10(13 A) – in fact I also talked to my CA in Kochi and he was also of the opinion that it should suffice. I have been living in this same address and using it for my HRA returns for the past 2 years without any issues. "

Ashish Sharma (Service) (1028 Points)
Replied 16 February 2010

Originally posted by : Amir
	Dear Nitin, I agree with friend Ashish that for claiming HRA house should be occupied by the assessee himself only & not on his behalf by his family... Further the purpose of HRA is to put an employee close to his work place & claiming the exemption of a House which is located in alltogether different city would defeat this very purpose of HRA.

Nitin, Freind Amir has Cleared the purpose of Occupied and i m totaly agreed with him

Deepak Jain (CA) (69 Points)
Replied 17 February 2010

As per the Income Tax Act for claiming exemption the accommodation should occupied by the Assessee not by any family member.

In view of above, an employee can't claim exemption u/s 10 (13A) if employee is not residing in the house for which he is paying rent

Deepali (Student CA IPC / IPCC) (82 Points)
Replied 03 July 2010

Originally posted by : Amir
	Dear Suresh, There is no limit as such prescribed anywhere with respect to payment.. Only thing is amount exceeding following limits will be taxable - 1) 50% of (Basic + DA+ Commission based on Turnover) in case of 4 Metro Cities......... 2) 40% of (Basic + DA+ Commission based on Turnover) in case of other cities..... The above amount shall also be compared with Rent paid - 10%( Basic + DA+ Commission based on Turnover) for the purposes of determining exemption.

Does Bangalore now come under Metro city to ccalculate 50% HRA exemption ?

CA. Abhishek K. Pandey (Manager (Advance)) (901 Points)
Replied 03 July 2010

Originally posted by : Deepali
	Does Bangalore now come under Metro city to ccalculate 50% HRA exemption ?

No.

manish (author) (68 Points)
Replied 03 July 2010

Dear Nitin,

the house should be occupied by the assessee. Maybe the agreement is in ur name, but still a prudent ITO will immediately come to know that ure not residing here as Bangalore (where u are working and Kochi are two different cities). I suggest you should not enter into conflict with the Department as it would be a weak case.