HOUSE RENT ALLOWANCE

Query 1]

Sir, my basic pay during financial year 2009-10 is Rs. 2,78,200/- and Dearness allowances is Rs. 61,224/-. I have received Rs. 55,656/- for House Rent Allowance. I have paid Rs.30,000/- as actual rent for occupying the rented house. I will be thankful if you guide me about on how much amount I can get rebate/exemption/deduction? What are the conditions/method for such claim? [bang_anil@yahoo.in]

Opinion:

Exemption in respect of House Rent Allowance is regulated by Section 10(13A) read with Rule 2A of the Income Tax Rules, 1962. The least of following is exempt from tax:

1. An amount equal to 50% of salary, where the residential house is situated at Bombay, Calcutta, Delhi or Madras and an amount equal to 40% of salary where residential house is situated at any other place;
2. House rent allowance received by the employee in respect of the period during which the rental accommodation is occupied by the employee during the previous year; or
3. The excess of rent paid over 10% of salary.

Following points need to be taken in to consideration while calculating the amount of HRA admissible as exemption u/s 10(13A):

1. “Salary” for the purpose of computation of exemptions u/s 10(13A) means Basic Salary and includes Dearness Allowance if terms of employment so provide. It also includes commission based on a fixed percentage of turnover achieved by an employee as per the terms of contract of employment AND EXCLUDES ALL OTHER ALLOWANCE & PERQUISITE.
2. Exemption is not available where an employee lives in his own house, or in a house for which he doesn’t pay any rent.

As actual rent payment of Rs. 30,000/- doesn’t exceed 10% of the salary, you are not entitled for exemption u/s 10(13A) towards House Rent Allowance received from your employer.

Query 2]

Sir, I am a Senior citizen having pension of Rs. 8,300/- p.m. & Fixed Deposit with bank of Rs. 8.30 Lacs which is based on Either or Survivor mode having different maturity dates viz. 2012 / 2015 / 2015 & 2018. I am also having a self occupied flat with ownership rights. I have taken a loan of Rs. 3.94 Lacs on my FD (Demand Loan) in the month of Jan’10. I wish to avail Tax exemption by filling form 15H which I used to do earlier. What will be the tax liability / implication assuming all the criteria mentioned above. Presently, I do not have a Pan Card presently nor I have applied for it till date. I do not have any LIC policies, nor any tax saving instruments.

Please advice & also let me know the source of saving the tax considering all FD’s, pension & Flat ownership. Whether I will have to apply for the PAN Card? [suvidhaa@rediffmail.com]

Opinion:

1. The basic exemption limit for senior citizen for the F.Y. 2008-09 is Rs. 2.25 Lacs whereas it is Rs. 2.40 Lacs for the F.Y. 2009-10 & F.Y. 2010-11.
2. Given the investment & income data and assuming the Interest income on FD even @ 12%, your income is appearing to be less than the basic exemption limit applicable to the senior citizen. Resultantly, your income tax liability is Nil in the F.Y. 2009-10 as well as in the F.Y. 2010-11.
3. You can get the interest on FDR without deduction of tax at source (T.D.S) during the F.Y. 2009-10 by filing the Declaration Form-15H.
4. However, for the F.Y. 2010-11, Permanent Account Number is mandatorily require to be quote in the declaration form for getting income without deduction of tax at source. For getting the interest income from bank, you have to apply for the PAN & also required to quote the same in the Declaration Form for non deduction of tax at source.

Query 3]

My wife is getting a house as gift from her mother. Should we get it by gift or via will? What is the procedure? If my mother-in-law desires to gift the house, Gift deed is required? Is it require to be registere compulsorily? What is tax liability? Kindly elaborate and oblige.

[K.S. Popat]

Opinion:

1. There is no income tax / gift tax liability in the hands of your wife on receiving the property from her mother, either through Gift Deed or via Will.
2. Whether to receive the property by gift or will is a question dependent on various other factors & cannot be answered in isolation.
3. For Gift of immoveable property, Registration is compulsory under the Registration Act.
4. For WILL, even though registration is not compulsory, it is always advisable to get it register.

HOUSE RENT ALLOWANCE

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