Sunday, October 13, 2013

HRA EXEMPTION :LANDLORD's PAN MANDATORY IF RENT PAID OVER ONE LAKH PER ANNUM


on Sunday, October 13, 2013

Not a good news for salaried person ,who are living in rented house and claiming House rent allowance exemption under section 10 (13A )of Income Tax Act.Income Tax department has recently released CIRCULAR NO : 08/2013 F.No. 275/192/2013-IT(B) dated 10.10.2013 vide which ,it has been stated that  an employee who is claiming House rent exemption (HRA) and if annual rent paid by the employee exceeds Rs 1,00,000 per annum, it is mandatory for the employee to report PAN of the landlord to the employer.


Earlier the submission of  Pan of landlord was mandatory if rent paid  was 1,80.000 per annum wef financial year 2011-12 ,further it has been increased to 2,00,000 for fy 2012-13 (circular 08/2012) and now the limit has been significantly reduced to one lakh only ? wef financial year 2013-14.

This will be a problem for many employees as land lord generally reluctant to provide PAN on rent receipt  or otherwise to tenant.

Abstract of the relevant provisions from circular 8/2013 dated 10.10.13 is reproduced hereunder. 
Further if annual rent paid by the employee exceeds Rs 1,00,000 per annum, it is mandatory for the employee to report PAN of the landlord to the employer. 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.
Further as given above, circular specified that in case the landlord does not have a pan , employee can give a declaration to this effect along with name and address of the landlord to his/her employer.

So all employees /employers /DDO(drawing and disbursing officer) should note down  this amendment and make sure the compliance of it while finalising the calculation and deduction of tax on payment of salary.

How to calculate  HRA exemption amount 

According to Rule 2A of the Rules, the quantum of exemption allowable on account of grant of special allowance to meet expenditure on payment of rent shall be the least of the following:

  1. The actual amount of such allowance received by the assessee in respect of the relevant period i. e. the period during which the accommodation was occupied by the assesse during the financial year; or
  2. The actual expenditure incurred in payment of rent in excess of 1/10 of the salary due for the relevant period; or
  3. Third is 
    1. Where such accommodation is situated in Bombay, Calcutta, Delhi or Madras, 50% of the salary due to the employee for the relevant period; or
    2. Where such accommodation is situated in any other places, 40% of the salary due to the employee for the relevant period
For this purpose, "Salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.


To claim the House rent exemption other points should also kept in mind

  1. Under section 10(13A) of the 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 is exempt from Income-tax to the extent as may be prescribed, having regard to the area or place in which such accommodation is situated and other relevant considerations.(read above how to calculate HRA exemption)
  2. It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in Rule 2A, qualifies for exemption from income-tax. Thus, house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. 
  3. The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding the House Rent Allowance or any portion thereof from the total income of the employee.
  4. Though incurring actual expenditure on payment of rent is a pre-requisite for claiming deduction under section 10(13A), it has been decided as an administrative measure that salaried employees drawing house rent allowance upto Rs.3000/- per month will be exempted from production of rent receipt. It may, however, be noted that this concession is only for the purpose of tax-deduction at source, and, in the regular assessment of the employee, the Assessing Officer will be free to make such enquiry as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent.
Whether these measure is correct or not  ? Give your opinion :

Many people thinks that this is a measure to unearth the unaccounted money ? But we beg to differ with them ,Salary persons mostly believes in paying tax correctly ,in fact they have no option as there tax is to be deducted on payment of salary , so we don't think that salaried persons have unaccounted money as much as their Businessman friends may have  .

More over How measures like above helps in unearth unaccounted money ? 

Further what is the logic of fixing Rs 1,00,000 where as for last year it was 2,00,000 for fy 2012-13 (circular 08/2012)  and rents are increasing day by day same as the inflation.

Business man booking expenses as they wish,whereas salaried person have no head under which they can show expenses to earn salaries and to maintain their status? 

Earlier standard deduction was available ,which has been deleted for the sake of simplicity of tax !! 

Why govt not interested to delete deductions available to businessman ?

We strongly oppose this move ,Further if CBDT really intend to unearth money then TDS deduction cut off amount under section 194I should also be reduced to RS 1,00,000 and further businessman should also be asked to get PAN of their landlord where rent paid exceeds Rs 1,00,000 .

Please comment .

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  1. If an employee produces the the rent receipt for Rs. 1 lac +, but failed to provide the PAN of landlord. Will he be eligible to avail the exemption of Rs.100000.00 of HRA

    ReplyDelete
    Replies
    1. The simple answer is no , however if employee provide a declaration that land lord does not have pan ,along with landlord address ,then he can claim exemption .
      Please refer quoted word in post above

      Delete
  2. Just wanted to know if we pay some fixed monthly amount to our parents. Can we claim this amount under rent by providing their valid pan card?.. Because I remember in somewhere on your earlier blog it was told that if we stay in our parents house and pay some monthly amount. Then we can show this under rent paid, not sure how it works if rent is paid to family members?

    ReplyDelete
    Replies
    1. rent can be /should be paid to owner of the house ,so if your father/mother or other member is owner of house then you can pay rent to him/them.And get rent receipt from them .
      However they have to include this amount in "income from house property"

      Delete
  3. Would you pls confirm if Last year this limit was 180000 per annum?

    ReplyDelete
    Replies
    1. in fact last year figure was 2,00,000 as per circular 08/2012

      Delete
  4. This government MP/Lok Sabha members sitting there and making the rules, becasue they are not paying rent for the free bangalows they get, but if we ask them they will show the recipts that they are paying the rent, foolish blood suckers, they think that still common man does not understand anything....
    I would prefer to live in other country ... i seriously afraid of india's future

    ReplyDelete
  5. As per your reply on 16, 2013 at 6:28 PM....if mother is owner of house and she is house wife means not a tax payer then can we get rent receipt to produce in tax rebate .

    ReplyDelete
    Replies
    1. Yes.She can issue rent receipt if she is owner of house

      Delete