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Thread: HRA exemption (House is taken on lease) in IT

  1. #1
    Member ramanareddy is on a distinguished road
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    Question HRA exemption (House is taken on lease) in IT

    Dear sirs

    If a house is taken as lease for three years by paying lumpsum amount at once ,no need to pay monthly rent.What is the procedure for calculating the HRA exemption in income tax calculation.Kindly enlight me in this issue.

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    Senior Member tvenkatam is on a distinguished road
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    Quote Originally Posted by ramanareddy View Post
    Dear sirs

    If a house is taken as lease for three years by paying lumpsum amount at once ,no need to pay monthly rent.What is the procedure for calculating the HRA exemption in income tax calculation.Kindly enlight me in this issue.
    Dear Mr. Reddy,

    In respect of ‘salaried’ class of employees of Central/State Governments, one of the criterion prescribed for arriving at the quantum of exemption allowable on HRA drawn to meet the expenditure on payment of rent is as below:

    - The actual expenditure incurred in payment of rent in excess of 10% of salary

    It may not be possible to quantify the actual rent paid in case of leased accommodation as mentioned by you unless you obtain a receipt from the house owner for an equivalent value of market rent.

    The Circular of IT Department also clarifies as under:

    “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”.

    If the monthly rental value of the accommodation is below Rs. 3000/- you may safely report the actual expenditure on rent with out the supporting rent receipt.

  3. #3
    Senior Member aneesh is on a distinguished road
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    Default Income Tax

    Sir

    In case of quarters / Accommodation being provided by the employer 7 1/2 percent of the salary is being included as perquisite for employees working under central autonomous bodies in our office. However in case of Central Govt servants only license fees is being included under Perks. Please enlighten me whether any new orders have been issued on this subject treating both at par. In our office 7.5 % of salary minus license fees is being taken as perks. Is it correct? Any of the member may please clarify.

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    Senior Member tvenkatam is on a distinguished road
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    Quote Originally Posted by aneesh View Post
    Sir

    In case of quarters / Accommodation being provided by the employer 7 1/2 percent of the salary is being included as perquisite for employees working under central autonomous bodies in our office. However in case of Central Govt servants only license fees is being included under Perks. Please enlighten me whether any new orders have been issued on this subject treating both at par. In our office 7.5 % of salary minus license fees is being taken as perks. Is it correct? Any of the member may please clarify.
    Dear Mr. Aneesh,

    As per the rules for valuation of perquisites clarified vide Circular No. 1/2010 of IT Dept. dated January 11, 2010 the value of perquisite for Central and State Government employees will be equal to the license fee charged for the accommodation as reduced by the rent actually paid by the employee. For those salaried employees not in Central/State Government employment, where the accommodation provided is owned by the employer, the rate is 15% of salary for city with population 25 lakh or more, 10% of salary for population between 10-25 lakh and 7.5% of salary for other cities as reduced by any amount of rent paid by the employee.

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    Senior Member aneesh is on a distinguished road
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    Default Income Tax

    Quote Originally Posted by tvenkatam View Post
    Dear Mr. Aneesh,

    As per the rules for valuation of perquisites clarified vide Circular No. 1/2010 of IT Dept. dated January 11, 2010 the value of perquisite for Central and State Government employees will be equal to the license fee charged for the accommodation as reduced by the rent actually paid by the employee. For those salaried employees not in Central/State Government employment, where the accommodation provided is owned by the employer, the rate is 15% of salary for city with population 25 lakh or more, 10% of salary for population between 10-25 lakh and 7.5% of salary for other cities as reduced by any amount of rent paid by the employee.
    Sir,

    Thank you for your reply. I have gone through the Circular quoted by you. I really appreciate the valuable guidance being given by you

    With regards

  6. #6
    Senior Member jaleelethiyil is on a distinguished road
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    Quote Originally Posted by aneesh View Post
    Sir

    In case of quarters / Accommodation being provided by the employer 7 1/2 percent of the salary is being included as perquisite for employees working under central autonomous bodies in our office. However in case of Central Govt servants only license fees is being included under Perks. Please enlighten me whether any new orders have been issued on this subject treating both at par. In our office 7.5 % of salary minus license fees is being taken as perks. Is it correct? Any of the member may please clarify.
    This is 15% in cities like Mumbai and tax is a big amount.Also they have to pay maintenance charge and not geting HRA.In addition their spouse working in govt department will not get HRA as per traditional HRA rule.In short working spouse is depriving a big amount from their payment even though their combined output is not less than two individual.In these case PSU employees are treated in par with private employees for deducting more tax and treated in par with govt employees for depriving HRA to spouse.Even after depriving big amount if the allotee is transfered,the spouse and dependents have to vacate the accomodation as both are in defferent sector.As both are in defferent sector and governed by defferent rules, transfer both in to same station is not possible.

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    Member vasudevan is on a distinguished road
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    Sir ,I want a clarification. I have bought an LIG housing flat with SBI loan.Till date the flat is not handed over to me from the housing board.And I wish to present it to my son or daughter .Can i get both the HRA exemption and HBA interest deduction from salary

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    Senior Member RKPATHAK is an unknown quantity at this point
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    No you cannot get both the benefits

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    Senior Member jaleelethiyil is on a distinguished road
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    Quote Originally Posted by RKPATHAK View Post
    No you cannot get both the benefits
    If the own house and working place is happened to be in defferent station whether we can claim both the HBAlone exemption and house rent exemption simuntaniously or not.

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    Senior Member RKPATHAK is an unknown quantity at this point
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    The case of Vasudevan is different. He would like to transfer ownhouse in the name of his children and take rent receipt from them. This is logical incorrecct. On the contrary, there are number of cases where a govt servant purchased a house and kept locked paying hba principal/interest and taken a house on rent in the same city near to his work place. In that case he can avail off both the benefits

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    Senior Member tvenkatam is on a distinguished road
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    Quote Originally Posted by vasudevan View Post
    Sir ,I want a clarification. I have bought an LIG housing flat with SBI loan.Till date the flat is not handed over to me from the housing board.And I wish to present it to my son or daughter .Can i get both the HRA exemption and HBA interest deduction from salary
    Dear friend,

    The extant rules governing assessment of income tax in respect of salaried employees provide for taxing income from house property. In so far as income from self occupied property is concerned the same is to be treated as NIL. The deduction permissible against this NIL income is interest on borrowed capital up to Rs. 150000/-.

    Money may be borrowed prior to the acquisition or construction of the property. In such a case, interest paid/payable before the final completion of construction or acquisition of the property will be aggregated and allowed for five successive financial years starting with the year in which the acquisition or construction is completed.

    As regards ownership of the house, there is an entity of ‘deemed owner’ under the Income Tax Rules, eligible for availing the deduction of interest on borrowed capital. The ownership may be deemed if the house is transferred to spouse or minor child.

    HRA exemption may also be claimed if the house is self occupied on possession.

  12. #12
    Member vasudevan is on a distinguished road
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    Thank u sir for taking pain to guide me.Housing Board is to handover the house next month.The loan principle and interest is paid to the Bank for 6 months.Iam going to present the house only in next year and this year i myself would ooccupy it.I want both the HRA exemption and interest deduction,Shall I enjoy?

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    Senior Member jaleelethiyil is on a distinguished road
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    Quote Originally Posted by tvenkatam View Post
    Dear friend,

    The extant rules governing assessment of income tax in respect of salaried employees provide for taxing income from house property. In so far as income from self occupied property is concerned the same is to be treated as NIL. The deduction permissible against this NIL income is interest on borrowed capital up to Rs. 150000/-.

    Money may be borrowed prior to the acquisition or construction of the property. In such a case, interest paid/payable before the final completion of construction or acquisition of the property will be aggregated and allowed for five successive financial years starting with the year in which the acquisition or construction is completed.

    As regards ownership of the house, there is an entity of ‘deemed owner’ under the Income Tax Rules, eligible for availing the deduction of interest on borrowed capital. The ownership may be deemed if the house is transferred to spouse or minor child.

    HRA exemption may also be claimed if the house is self occupied on possession.
    Venkatsir,
    Thank you for giving best understanding in this subject.Icould not have understand the last sentence of your reply.please clarify.

  14. #14
    Senior Member tvenkatam is on a distinguished road
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    Quote Originally Posted by jaleelethiyil View Post
    Venkatsir,
    Thank you for giving best understanding in this subject.Icould not have understand the last sentence of your reply.please clarify.
    Dear friend,

    Salaried employees claiming exemption of house rent allowance up to Rs.3000/- per month are exempt from production of rent receipt. Exemption of HRA beyond this limit can not be availed with out production of rent receipt.

  15. #15
    Senior Member jaleelethiyil is on a distinguished road
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    Quote Originally Posted by tvenkatam View Post
    Dear friend,

    Salaried employees claiming exemption of house rent allowance up to Rs.3000/- per month are exempt from production of rent receipt. Exemption of HRA beyond this limit can not be availed with out production of rent receipt.
    Sir,
    My understanding from your clarification is,those who are residing own home also eligible for the minimum exemption without giving any declaration.

  16. #16
    Senior Member tvenkatam is on a distinguished road
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    Of course, Yes.

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