Central Govt. Changes Rule on House Rent Allowance Claim

by            Mr. Suresh Parthasarathy,

          SPP Wealth and Financial Planners

Many people live in their own houses, yet claim HRA  (House Rent Allowance) tax benefit by submitting a rent receipt. The central government has now plugged this loophole. It has also lowered the exemption limit for reporting the rent received. The Central Board of Direct Taxes (CBDT) recently issued a circular  in this regard.

If you are a salaried taxpayer claiming HRA exemption, and you pay a rent of more than Rs.1 lakh a year, you will now have to  give your landlord’s PAN (Permanent Account Number). If your landlord does not have a PAN,  you have to give the Income tax authorities the name and address of your landlord and a declaration from the landlord saying he or  /she does not have a PAN.

 

Mr. Suresh Parthasarathy,
 CEO,  SPP Wealth and Financial Planners

Till now, if the total rent paid was less than Rs. 15,000 a month, there was no need to submit the landlord’s PAN details. The new rule effectively reduces this limit to Rs. 8,333 a month.

Henceforth, be careful about the HRA receipt.  Here’s a sample calculation to determine the  HRA claim:

(a)  HRA amount received

(b) Rent paid in excess of 10% salary

(c) 50% of salary if you live in Mumbai / or Delhi / or Kolkata / or Chennai or 40% of salary if you reside in other cities. Salary is the sum of Basic Pay and Dearness Allowance.

Sample calculation:

Assume you live in any one of 4 metros:

Basic salary :  Rs. 20,000

DA                 :  Rs. 10,000

HRA received : Rs.  10,000.

Rent paid:        Rs.  15,000

How much is eligible for tax benefits as per the act?

Whichever is the lowest.

HRA : Rs.  10,000.

Rent paid in excess of 10% of salary: Rs. 15,000 – (10 % of 30,000),

or Rs.  15,000 - Rs.  3,000= Rs.  12,000.

50% of salary (Rs. 30,000) is Rs.  15,000.

The least of the 3 figures (10,000 / 12,000 / 15,000) is

HRA received (Rs. 10,000).

Hence, hence the entire HRA is exempted from tax.

For clarification write to info@myassetsconsolidation.com

Contact:

Mr. Suresh Parthasarathy,

CEO and Chief Financial Planner,

SPP Wealth and Financial Planners P Ltd,

Mobile 98404 54737

Land Line 044-42046359.

www.myassetsconsolidation.com.

Email: info@myassetsconsolidation.com.

skype  suresh.partha

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