House Rent Allowance. Generally every employee receives a HRA
from their employers as part of his salary package, in accordance with terms
and conditions of employment.
HRA is given to meet the cost of a rented house taken by the employee for his stay. Income Tax Act allows for deduction in respect of HRA
paid to employees so that salaried assesse can get some relief in terms of Tax Savings.
Recent Developments:
Recently CBDT changes some law related to HRA.
According to a CIRCULAR NO. 8/2013, Dated: Dated: October 10, 2013 issued by Central Board of Direct Taxes (CBDT), if annual rent paid by
an employee exceeds Rs.1 lakh per annum, it is mandatory for the employee
to report PAN of the landlord to the employer.
If your landlord doesn’t have a PAN, you have
to make a declaration. According to the CBDT circular, in case the landlord does not have a PAN, a declaration to
this effect from the landlord along with the name and address of the landlord should be filed by the
employee.
Some employee believes that Tax Saving on HRA
shall be available on the Total Rent paid but this is myth. There is condition
as per Rule 2A/Section 10(13A)
Conditions:
As Per rule 2A/section 10(13A) an ‘Employee’
who is in receipt of HRA can claim exemption, if he doesn’t live in his own
house & pays rent in excess of 10% of salary for his residence.
When HRA Exemption is
not Available:
a)
When the Assessee stays in his own house.
b)
When Assessee doesn’t pay any rent.
c)
When s/he doesn’t incur any expenditure towards rent.
d)
When rent paid is less than 10% of salary.
There is always a Question which arises every
mind that Whether HOME LOAN Tax Benefit & HRA can be claimed
simultaneously.
The tax benefits for home loan and HRA are two separate entities and have no
direct bearing on each other. As long as you are paying rent for an
accommodation, you can claim tax benefits on the HRA component of your salary, while also availing tax benefits on your
home loan. This could be the case if your own home is rented out or you work
from another city etc. However, you need to account for any rental income you
receive from the property you own under income from other sources.
COMPUTATION OF SALARY
FOR HRA
Salary=Basic Salary + DA for retirement
benefits + Commission forming part of salary.
Taxable HRA
|
Amount received for
HRA
|
XXXX
|
||
|
Less: exemption u/s
10(13A) is minimum of the following;
|
|||
|
1. Actual amount
received
|
XX
|
||
|
2. 50% / 40% of
salary*
|
XX
|
||
|
3. Rent paid less
10% of salary
|
XX
|
XX
|
|
|
TAXABLE HRA
|
|
XXX
|
*50% if employee resides in
Delhi/Mumbai/Kolkata/Chennai otherwise 40%
- See more at:
http://taxguru.in/income-tax/house-rent-allowance-hra.html#sthash.zceDzD1c.dpuf