TAX
TALK-11.08.2014-THE HITAVADA
TAX
TALK
CA.
NARESH JAKHOTIA
Chartered Accountant
“HRA
EXEMPTION & PAN SUBMISSION OF THE LANDLORD ”
Query 1]
I am an employee in a PSU residing at Bilaspur (CG ). I
receive HRA from my Company and I live in a rented premises. But I could not
submit the rent receipts to my Company for the Financial Year 2013 - 14, so
the Company deducted and deposited the tax without considering the
provisions of HRA exemptions.
My query is -
1.
Whether can I claim the HRA exemptions while filing
the return online? If yes, will I still require the rent receipts from the
landlord?
2.
My actual rent does not exceed Rs. 1,00,000/- p.a.
Will I still require the PAN of the landlord in this case?
3.
My Basic Salary & DA keep on changing every month,
so will I have to take the Basic Salary & DA for every month as per the pay
slip and do the calculations for HRA?
I had purchased a house in 2008 under the Self
Financing Scheme from the Housing Board for which I had availed the facility of
HB loan from my Company and against which the Principal and the Interest amount
is being deducted from my Salary. But since I have not received any Completion
Certificate from the Housing Board till date (as the house is still not
completed and I have not received the possession till date), I could not submit
the same to my Company. My queries are:
i.
As I could not submit the required papers to the
Company, won't I be able to claim the Pre - Construction period Interest as the
3 year period has also been lapsed?
ii.
Can I claim the deduction U/s 24 for Housing Interest
of Rs. 34,897/- for the F.Y. 2013-14 while filing my e-return? If not, then
from when can I claim the deduction U/s 24? I have not claimed any deduction
regarding this till now in any year. I am eagerly waiting for your solution to
my problem. [Meena Mohan-minaraju26@gmail.com]
Opinion:
Employees
in receipt of House Rent Allowance (HRA) from the employer are eligible for exemption
if they are staying in a rented accommodation & paying the rent. While
working out deduction of tax at source (TDS) of employee, the disbursing
authorities (or employer) should satisfy themselves about the rent payment by insisting
the production of evidence of actual payment of rent before granting
exemption towards HRA or any portion thereof from the total income. Income Tax Department has further tightened its focus on
bogus HRA exemption claimed by salaried employees in income tax returns &
so now employees have to furnish the PAN of the landlord if the rent
payment exceeds Rs. 1 Lacs p.a. [Circular No. 8/2013 Dated 10.10.2013 issued by
CBDT]. 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.
[Though
incurring actual expenditure on payment of rent is a pre-requisite for granting
exemption under section 10(13A) by the employer, as
an administrative measure, salaried employees drawing house rent
allowance up to Rs. 3,000/- per month are exempted from
production of rent receipt to the employer/ disbursing authorities .
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.]
With
above minor background, it may be noted that
1. Even if the employer has not considered deduction
towards rent payment u/s 10(13A), employee can claim the same while filing
income tax return. The receipt is not required for uploading the return.
However, it CAN be demanded subsequently by the Assessing Officer.
2. PAN of the landlord, if rent payment exceeds Rs. 1
Lacs, is required by the employer to grant deduction towards HRA while working
out Tax to be deducted (TDS) from the salary income of the employee. If the
rent payment is not exceeding Rs. 1 Lacs, furnishing of PAN is not mandatory
and employer could grant deduction merely on the basis of rent receipt / rent
agreement of the landlord. It may be noted that even if the deduction towards
HRA is not considered by employer due to any reason whatsoever, employee could
claim the same while filing return of income if all other eligible condition of
deduction are satisfied.
3. Monthly Basic salary & DA would be aggregated to
arrive at yearly figure and then deduction towards HRA would be worked out.
As far as interest towards
pre-construction period is concerned, it may be noted that interest paid during
the period of construction of house property is not deductible in the year of interest
payment. Interest in respect of pre-construction period is deductible in five equal annual installments commencing from the
year in which the construction is completed. For this purpose “pre-construction
period” means the period commencing on the date of borrowing and ending on
March 31st immediately prior to the date of completion of
construction /acquisition.
There is one more penal
consequence in case the house property is not completed within a period of 3
years. In such case, deduction towards interest on
borrowed capital is also restricted to Rs. 30,000/- only & not Rs. 1.50
Lacs (now enhanced to Rs. 2 Lacs from the FY 2014-15 onwards) otherwise
available in case of self occupied house property.
In your specific case also,
deduction towards pre-construction period would be eligible for deduction only
after the construction of the house property. Without completion of the
construction of house property, deduction would not be admissible.
