Drawing house rent allowance upto Rs.3000/- per month will be exempted from production of rent receipt
Annual rent paid by the employee exceeds Rs 1,80,000 per annum, it is mandatory for the employee to report PAN of the landlord to the employer
Annual rent paid by the employee exceeds Rs 1,80,000 per annum, it is mandatory for the employee to report PAN of the landlord to the employer
According to Income Tax
Circular No. 5/2011 dated 16.08.2011
Circular No. 5/2011 dated 16.08.2011
(9) Under Section 10(13A) of the Income-tax Act, 1961,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. According to
rule 2A of the Income-tax Rules, 1962, the quantum of exemption allowable on
account of grant of special allowance to meet expenditure on payment of rent
shall be:
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. According to
rule 2A of the Income-tax Rules, 1962, the quantum of exemption allowable on
account of grant of special allowance to meet expenditure on payment of rent
shall be:
(a)
The actual amount of such allowance
received by the assessee in respect of the relevant period; or
The actual amount of such allowance
received by the assessee in respect of the relevant period; or
(b)
The actual expenditure incurred in
payment of rent in excess of 1/10 of the salary due for the relevant period; or
The actual expenditure incurred in
payment of rent in excess of 1/10 of the salary due for the relevant period; or
(c)
Where such accommodation is situated
in Bombay, Calcutta, Delhi or Madras, 50% of the salary due to the employee for
the relevant period; or
Where such accommodation is situated
in Bombay, Calcutta, Delhi or Madras, 50% of the salary due to the employee for
the relevant period; or
(d)
Where such accommodation is
situated in any other places, 40% of the salary due to the employee for the
relevant period,
Where such accommodation is
situated in any other places, 40% of the salary due to the employee for the
relevant period,
whichever is the least.
For this purpose, “Salary” includes dearness
allowance, if the terms of employment so provide, but excludes all other
allowances and perquisites.
allowance, if the terms of employment so provide, but excludes all other
allowances and perquisites.
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. 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.
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. 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.
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.
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.
Further
if annual rent paid by the employee exceeds Rs 1,80,000 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.
if annual rent paid by the employee exceeds Rs 1,80,000 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.
Source: http://law.incometaxindia.gov.in/DIT/Circulars.aspx
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