Simple and Easy Method to Calculate HRA Exemption.

Exemption of House Rent Allowance (‘HRA’)

under section 10(13A) of the Income tax Act, 1961 (‘the Act’)

HRA is a taxable receipt, however section 10(13A) of the Act, grants exemptions is respect of any HRA received by an employee from his employers, but certain conditions must be satisfied for this purpose.
A.    Conditions to be satisfied:
1    The allowance must be specifically granted to the employee by his employer
2    The employee must have actually incurred expenditure on payment of rent
3    The residential accommodation occupied by the employee should not be owned by him

B.    Working of exemption

C.    Further points:

Rent paid to wife/father/mother- Yes, HRA can be claimed subject to actual payment and please note house property must be on third own name.

Rent paid outside India for stay outside India –No deduction allowed HRA exemption available only for rent paid for living in India

Own house in one city and staying on rent house in other city- yes deduction allowed

No HRA mentioned in the salary slip- It means no HRA allowance provided by the employer, without any allowance we cannot claim HRA. Discuss with the employer

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How to Compute Your House Property Income and Claim Deduction u/s. 24(b) ?

Income From House Property

While taking into account the loss from House Property, the DDO shall ensure that the employee files the declaration referred to above and encloses therewith a computation of such loss from house property. Following details shall be obtained and kept by the employer in respect of loss claimed under the head “ Income from house property” separately for each house property:

1. Gross annual rent/value
2. Municipal Taxes paid, if any
3. Deduction claimed for interest paid, if any
4. Other deductions claimed
5. Address of the property

The DDO shall also ensure furnishing of the evidence or particulars in Form No. 12BB in respect of deduction of interest as specified in Rule 26C read with section 192 (2D).

How to Claim Deduction of Interest on Borrowed Capital for Computation of Income From House Property [Section 24(b)]:

Section 24(b) of the Act allows deduction from income from houses property on interest on borrowed capital as under:-

• the deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence. However, if it is actually not occupied by the employee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.
• the quantum of deduction allowed as per table below:

In case of Serial No. 3 above

1. The acquisition or construction of the house should be completed within3 years from the end of the FY in which the capital was borrowed. Hence, it is necessary for the DDO to have the completion certificate of the house property against which deduction is claimed either from the builder or through self-declaration from the employee.
2. Further any prior period interest for the FYs upto the FY in which the property was acquired or constructed (as reduced by any part of interest allowed as deduction under any other section of the Act) shall be deducted in equal installments for the FY in question and subsequent four FYs.
3. The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of Principal and Interest of the loan so repaid.

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Complete Procedure to exempt House Rent Allowances by Salaried Employee for Asstt. Year 2016-17.

To claim Exemption of House Rent Allowance paid by Salaried Employee for Asstt. Year 2016-17 under section 10(13A) of the Act, any special allowance specifically granted to an Salaried Employee (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 Rules, the quantum of exemption allowable on account of grant of special allowance to meet expenditure on payment of rent shall be the least of the following:

(a) the actual amount of such allowance received by the assessee in respect of the relevant period i. e. the period during which the accommodation was occupied by the assesse during the financial year; or

(b) the actual expenditure incurred in payment of rent in excess of one-tenth of the salary due for the relevant period; or

(i) where such accommodation is situated in Bombay, Calcutta, Delhi or Madras, 50% of the salary due to the employee for the relevant period; or

(ii) where such accommodation is situated in any other places, 40% of the salary due to the employee for the relevant period.

For this purpose, "Salary" includes dearness 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.

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.

Further if annual rent paid by the employee exceeds Rs 1,00,000 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.

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Relief allowed u/s. 54F to wife as she gifted one houe to here husband

Gift of house to spouse cannot be disregarded for the purpose of assessee's eligibility for deduction u/s 54F

Gift of house to husband prior to the date of transfer of the original capital asset(other than any residential house) cannot be disregarded for the purpose of reckoning assessee's eligiblity for deduction u/s 54F even if assessee along with her husband and spouse continue to reside in the same house even after the gift. Section 64(I)(iv) will not operate to nullify the gift and would operate only to club income from the gifted house in the hands of the donor spouse. The gift cannot be regarded as a sham merely because assessee along with her husband and spouse continue to reside in the same house even after the gift

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Interest on Refundable Deposits of tenants is allowable u/s. 24, if it uses to repay housing loan.

Interest paid on refundable security deposits received from tenants is allowable under section 24(b) if deposits are used to repay loan taken for purchase of house property

Where assessee repaid interest-free loan taken to purchase immovable property from interest-bearing refundable deposits received from tenants, these deposits are "borrowed capital" within the meaning of section 24(b) and interest on such deposits are deductible u/s 24(b).

Source: www.taxmann.com

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Calculation of House Rent Exemption, Benefits and is PAN mandatory of Landlord for Salaried Employee.

With handful of options to save tax for the salaried taxpayers, one can definitely explore the possibility of reducing tax bill by revisiting the exemption & deduction provision. One such tool is claiming an exemption towards rent payment of residential accommodation.

Employees generally receive a house rent allowance (HRA) as a part of the salary package, in accordance with the terms and conditions of employment. HRA is given to meet the cost of a rented house taken by the employee for his stay. Exemption on HRA is available under Section 10(13A) of the Income Tax Act and Rule 2A of the Income Tax Rules. Taxpayer would be surprised to see that there is no amount wise upper ceiling on HRA exemption.

An employee can claim exemption on his HRA under the Income Tax Act if he stays in a rented house and is in receipt of HRA from the employer. In order to claim the deduction, an employee must actually pay rent for the house occupied. [HRA exemption benefit can be claimed only by the salaried taxpayer. Self employed person may save little tax by claiming deduction u/s 80GG if they are staying in a rented premise. Interestingly, deduction U/s 80GG cannot exceed Rs. 24,000/- p.a. whereas there is no such ceiling while claiming exemption u/s 10(13A). May be it is where salaried taxpayer have better favoring tax law provision as compared to self employed.]

In case one stays in an own house, nothing is deductible and the entire amount of HRA received is subject to tax. Exemption from HRA will be lowest of the following three factors:

1. Actual HRA received from the employer
2. Actual house rent paid by employee minus 10% of basic salary
3. 50% of the basic salary if employee live in a metro or 40% of basic salary if lives in a non-metro.

Minimum of above is allowed as income tax exemption on HRA. Salary here means basic salary which includes dearness allowance if the terms of employment provide for it, and commission based on a fixed percentage of turnover achieved by the employee. The deduction will be available only for the period during which the rented house is occupied by the employee and not for any period after that.

Whether HRA & Home loan benefit could be availed simultaneously?

Misconception prevails that HRA exemption is not available if taxpayer also have availed housing loan. It’s wrong. If the taxpayer is staying in a rented house, HRA benefit can be claimed despite the fact that he owns another house (whether rented out or vacant, whether in the same city or elsewhere) & is claiming the tax benefit available on home loan also. The tax benefits against home loan and HRA are two separate independent deductions and have no direct bearing on each other. As long as employee is paying rent for rented accommodation occupied by him, HRA exemption could be claimed while also availing tax benefits of other self owned house property.

Whether PAN of the Landlord is mandatory for HRA claim:

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 with the employer 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.]  

Source: The Hitwada News Paper

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Tax Calculation for Salaried Employee on Income From House Property Head For Asstt. Year 2015-16.

Just, before a few days CBDT has issued a circular for Computation of Income and Income Tax Deductions from Salaries during the Fin. Year 2014-15 u/s. 192 of the Income Tax Act, 1961.  As per this circular Tax Calculation for Salaried Taxpayee on Income under the head of "House Property" clarify as under :

It is reiterated that the DDO can take into account any loss only under the head ―Income from house property. Loss under any other head cannot be considered by the DDO for calculating the amount of tax to be deducted.

Computation of income under the head “ Income from house property :
While taking into account the loss from House Property, the DDO shall ensure that the employee files the declaration referred to above and encloses therewith a computation of such loss from house property. Following details shall be obtained and kept by the employer in respect of loss claimed under the head ―Income from house property separately for each house property:
a) Gross annual rent/value
b) Municipal Taxes paid, if any
c) Deduction claimed for interest paid, if any
d) Other deductions claimed
e) Address of the property
f) Amount of loan, if any; and
g) Name and address of the lender (loan provider)

Conditions for Claim of Deduction of Interest on Borrowed Capital for Computation of Income From House Property [Section 24(b)]:
Section 24(b) of the Act allows deduction from income from houses property on interest on borrowed capital as under:-

1. the deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence. However, if it is actually not occupied by the employee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.
2. the quantum of deduction allowed as per table below:

In case of Serial No. 3 above

• The acquisition or construction of the house should be completed within3 years from the end of the FY in which the capital was borrowed. Hence it is necessary for the DDO to have the completion certificate of the house property against which deduction is claimed either from the builder or through self-declaration from the employee.
• Further any prior period interest for the FYs upto the FY in which the property was acquired or constructed (as reduced by any part of interest allowed as deduction under any other section of the Act) shall be deducted in equal installments for the FY in question and subsequent four FYs.
• The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of Principal and Interest of the loan so repaid.

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All about TDS on Rent u/s. 194-I - FAQs

1. What are the provisions relating to TDS on rent? From which date same are applicable?

   As per the Finance Act, 1994 the provisions of TDS on rent have been introduced w.e.f. 1.6.1994. The salient feature of Sec. 194-I are as under:-

i)   The provisions are applicable only in cases where the person making the payment of rent is an individual or HUF who is required to get his accounts audited u/s 44AB in the immediately preceding financial year (w.e.f. 1.6.2002) or any other person responsible for paying to a resident any income by way of rent. Prior to 1.6.2002 no individual or HUF was liable to deduct TDS from rent.

ii)  The TDS is required to be deducted in case the rent paid or payable to a particular person during a financial year exceeds Rs. 1,80,000 w.e.f.1.7.2010 (upto 30.6.2010 the limit was Rs. 1,20,000).

iii) A facility has also been provided to obtain a certificate from the Assessing Officer for deduction of income-tax at a lower rate or for no deduction of income-tax in appropriate cases by making application in From No.13.

iv)  For the purpose of this section rent means any payment by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or factory building together with furniture, fixture, fittings and land appurtenant thereto. It will not be relevant whether the payee is the owner of the building or not?

     W.e.f. asst. year 2007-08, the Taxation Laws (Amendment) Act, 2006 have enlarged the scope of rent for the purpose of Sec. 194I, so as to include machinery, plant and equipment, whether rented together with building or separately, irrespective of the fact whether they are owned by the payee or not?

v)   The rates of TDS on rent are as under:

Particulars	Rate upto 30.09.09	Rate w.e.f. 01.10.09
Use of any land, building, furniture or fittings	15% (when payee is individual or HUF) 20% in other cases.	10% for all assessees
Use of plant, machinery or equipment	10% (from 1.6.07 to 30.9.09) prior to 1.6.07 the rate was same as rent of land and building	2% for all assessees

a. At the rate specified under the Income Tax Act; or

b. At the rates in force; or

c. At the rate of 20%.

2. Will tax be deducted from service tax included in rent?

   Service tax paid by the tenant does not partake the nature of income of landlord. The landlord only acts as a collecting agency for Government for collection of service tax. Therefore tax deduction at source (TDS) under Sec. 194-I of the Income-tax Act would be required to be made on the amount of rent paid/payable without including service tax.

   Further No TDS on service Tax: As per circular 01/2014 dated 13.01.2014 TDS is not applicable on service tax part if service tax is shown separately.

3. What does the “rent” mean for the purpose of Sec. 194-I?

   “Rent” means any payment, by whatever named called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together)any,-

   a. Land; or

   b. Building (including factory building); or

   c. Land appurtenant to a building (including factory building); or

   d. Machinery; or

   e. Plant; or

   f. Equipment; or

   g. Furniture; or

   h. Fittings,

whether or not any or all of the above are owned by the payee.

In other words, besides tax on land and building, tax shall now also be deductible for leasing out or hiring of machinery, plant, equipment, furniture and fittings whether given separately or together. Further, it shall be deductible whether or not any or all of the above are owned by the payee?

4. What are the circumstances under which no tax is to be deducted at source on rent as defined under Sec. 194-I ?

   No tax is required to be deducted at source under this section if the following conditions are satisfied:

   A) Where aggregate amount of rent does not exceed Rs. 180,000:- No tax is to be deducted if the aggregate amount of rent in the previous year does not exceed Rs. 180,000.

   B) Rent paid to the Government and certain entities:- No tax at source needs to be deducted from payments by way of rent made to Government and entities whose income is exempt from income-tax under clauses (20) and (20A) of Sec.10 of the Income tax Act.

   C) Certain entities required to file return under Sec. 139(4A) or 139(4C):- As per rule 28AB certain entities who are required to file return of income under Sec. 139(4A) or 139(4C) may apply in Form No. 13 for no deduction of tax at source provided certain conditions are satisfied.

   D) Certain entities whose income is unconditionally exempt under Sec. 10:- In case of certain entities whose income is unconditionally exempt under Sec. 10 and who source : www.trpscheme.com (As amended by Finance Act, 2013) are statutorily not required to file return under Sec. 139 there will be no requirement for TDS, since their income is any way exempt.

5. Where is the limit of Rs. 180,000 for non-deduction of tax at source applicable in case of each co-owner?

   Where the share of each co-owner in the property is definite and ascertainable, the limit of Rs. 180,000 will be applicable to each co-owner separately.

6. What are the provisions regarding low deduction or no deduction of tax on rent under Sec. 194-I ?

   Any person to whom rent is payable may make an application in Form No.13 to the Assessing Officer and obtain such certificate from him, as may be appropriate, authorizing the payer not to deduct tax or to deduct tax at lower rate.

   As per Sec. 206AA(4), w.e.f. 1-4-2010, no certificate under Sec. 197 for deduction of tax at Nil rate or lower rate shall be granted, unless the application made under that section contains the Permanent Account Number of the applicant.

7. What is method of taking credit of TDS on advance rent ?

   On advance rent pertaining to more than one financial year, the tax is deducted at source in the year of receipt of advance rent. The credit for TDS shall be allowed to the assessee in the same proportion in which such income from rent is offered for taxation for different assessment years, based on the single TDS certificate furnished for the entire advance rent.

   However, if the rent agreement gets terminated in a subsequent year or rented property is transferred and the balance advance is refunded to the transferee or the tenant, as the case may be, the credit for entire balance of TDS which has not been given credit, shall be allowed in the year of termination.

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Submission of PAN of Rented Owned premises to get House Rent Allow. Expemption from Income Tax.

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.

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Resident assessee can claim losses incurred from house property located abroad in return filed in India

IT/ILT: An option is available to the resident-assessee to file return of income either under the Indian tax laws or under the treaty - If assessee files the return of global income in India, the Revenue is bound to give effect to such return - Therefore, losses from house property located abroad was to be included in the income of resident-assessee

Facts:

• The assessee filed his return of income after including losses from house property located abroad. He purchased this property in Australia which was already on rent. He obtained a loan from ANZ Bank, Australia ('ANZ') to purchase the property.
• The loss was computed under the head house property due to payment of interest to ANZ.
• During appellate proceedings, the CIT(A) referred to the decision of Apex Court in case of CIT v. PVAL Kulandagan Chettiar [2004] 137 Taxman 460 (SC) and held that as far as rent income from Australia was concerned, the assessee was required to file the return in Australia and such income could not be included in Indian income. Therefore, negative income could not be assessed in India.

The Tribunal held in favour of assessee as under:

1. In view of Section 5 of the Income-tax Act ('the Act') in case of a resident, income accruing or arising outside India had to be assessed in India. The Sec 90(2) of the Act clearly provides that wherever DTAA is applicable to assessee he has an option to apply either Indian Tax Laws or provisions of DTAA, whichever are more beneficial to him.
2. Therefore, the assessee had an option to file return of income under the Indian tax laws where DTAA was applicable.
3. In the instant case, the assessee had exercised the option of filing return under Indian laws, thus, the same could not have been refused simply because DTAA was applicable.
4. The decision in case of PVAL Kulandagan Chettiar (supra) was distinguishable because in that case the assessee was a resident of India and Malaysia. It was due to financial connection of the assessee with Malaysian property it was held that income from Malaysian rubber plantation was taxable only in Malaysia.
5. The assessee had right to file the return of global income in India and the Revenue was bound to give effect to such return. The CIT(A) was not correct in holding that income from house property in Australia was not assessable in India. Accordingly, the order of the CIT(A) was to be set aside and the Assessing officer was to be directed to include the loss from such house property in the hands of the assessee.

Source: www.taxmann.com

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Grant of HRA at enhanced rates to the Central Government employees.

CONFEDERATION OF CENTRAL GOVT. EMPLOYEES & WORKERS

1st Floor, North Avenue PO Building, New Delhi -110001

Website: www.confederationhq.blogspot.com

Email: confederationhq@gmaiI.com

Ref: Confd/GENL/2014

Dated - 28/04/2014

To
The Secretary
Ministry of Finance
Department of Expenditure
North Block, New Delhi

Sir,

Sub: Grant of HRA at enhanced rates to the Central Government employees as per 2011 census.

It is reported that Registrar General & Census Commissioner of India has sent the final CD to Ministry of Finance containing the Final report of Urban Agglomeration (UAs) PCA of 2011, long back, But no decision is taken by the Finance Ministry till date for reclassification of cities/towns on the basis of 2011 census for the purpose of grant of HRA/Travelling Allowance.

It is requested to kindly take necessary action for getting the benefit of enhanced rate of HRA/Travelling Allowance to the Central Government Employees on the basis of the latest report of Census 2011.

A line in reply from your end will be highly appreciated.

Yours faithfully,

sd/-

(M.Krishnan)

Secretary General

Copyto: Com. J.R.Pateria, General Secretary, Coordinating Committee of Central Government Employees Association, Ghandhinagar C/o Directorate of Census Operations, Gujarat, Sector — 10-A, Gandhi Nagar-382010 (Gujarat)

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Is the amount taxable received after surrender of Tenancy Right ?

The tenancy right is a capital assets and surrender of tenancy right for Rs. 80 Lacs would yield Long Term Capital Gain (LTCG).

The benefit of 10% tax rate without indexation is available only on transfer of listed securities or unit or zero coupon bonds. The benefit is not available to LTCG arising from transfer of tenancy right or any other capital assets.

The important question that remains here is about the tax-ability of such amount. 

Tax-ability, tax saving options & other implication would depend upon multiple factors and documents. Apparently, it appears that the amount would be taxable in the hands of the firm as the tenancy right belongs to firm.

MEMORANDUM OF AGREEMENT

1. Date: _____________________

2. Place: ____________________

3. Parties:

3.1 _____________________, son of _________________, by faith – _____,  by Nationality – Indian, by Occupation - ________, residing at _______________________________________.

(Tenant/First Party, includes successors-in-interest and/or assigns)

AND

3.2 ____________________, son of _________________, by faith – _____, by Nationality – Indian, by Occupation - ________, residing at ______________________________________.

(Landlord/Second Party, includes successors-in-interest and/or assigns)

Tenant, Landlord collectively Parties and individually Party.

NOW THIS MEMORANDUM OF AGREEMENT WITNESSES AS FOLLOWS:

4. Background:

4.1 Ownership of the Second Party: The Second Party is the sole and absolute owner of and/or otherwise well and sufficiently entitled to the land and building situate and lying at the Premises known as ____________________________________ (Said Premises).

4.2 Tenancy of the First Party: The First Party is a monthly tenant in respect of a _______ [character of use] room having an area of _______ Sq. ft. be the same a little more or less on the ______ floor of the building in the Said Premises [Tenanted Portion] , at a monthly rental of Rs. __/- (Rupees _____________) only, payable according to English calendar month. The Tenanted Portion is described in the 1st Schedule below.

4.3 Proposal and Acceptance: The Landlord has now approached the Tenant to surrender the tenancy and all other rights incidental thereto due to some exigencies and the Tenant has agreed to surrender the tenancy and all other rights in the Tenanted Portion as well as to vacate the same by delivering khas and peaceful possession of the Tenanted Portion to the Landlord, subject to payment of a sum of Rs. _______/- (Rupees _______________) only (Consideration) by the Landlord to the Tenant towards the reimbursement the cost for shifting and rehabilitation.

4.4 Mutual Understanding & Recording of the Terms: The Parties upon negotiation have amicably arrived at the terms and conditions for such surrender of tenancy and conclusive and comprehensive terms and conditions superseding all previous documents and understandings, if any, are now being recorded by this Memorandum.   

NOW IT IS HEREBY AGREED AND DECLARED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:

1. Surrender of the Tenancy: The Tenant doth hereby agree to surrender his tenancy in respect of the Tenanted Portion, described in the 1st Schedule below in favour of the Landlord, upon payment of the Consideration by the Landlord.

2. Payment of the Consideration: The Landlord shall pay to the Tenant a total sum of Rs.__________/- (Rupees ____________) only towards the cost of shifting and rehabilitation charges and/or compensation for the inconvenience suffered by the Tenant to vacate the Tenanted Portion in favour of the Landlord in the manner specified in the Payment Schedule, described in the 2nd Schedule below.

3. Advance Payment: The Landlord at or before hereof has paid to the Tenant a sum of Rs.__________/- (Rupees ______________) only as an advance and part payment of the Consideration and the Tenant doth hereby as well as by the receipt and memo hereunder written, admit and acknowledge thereof.

4. Effective Date: The Tenant shall cease to have all his right, title and interest in the Tenanted Portion including the right of his monthly tenancy on and with effect from __________ (Effective Date).

5. Delivery of Possession: Within __________ from the date hereof the Tenant shall vacate and hand over peaceful and khas possession of the Tenanted Portion to the Landlord and shall obtain written receipt and acknowledgement thereof from the Landlord.

6. Release from the Liability: Both the Parties release and discharge each other from all liabilities arising under the Tenancy or any variation of the terms of the tenancy with effect from the Effective Date.

7. Representation & Warranty:

7.1 By the Tenant:

7.1.1 After the Effective Date the Tenant shall have no right, title and interest in and over the Tenanted Portion whatsoever and responsibility towards the Landlord, as well as no other or further claim and/or demand from the Landlord, save as specifically stated herein.

7.1.2 Upon delivery of the possession of the Tenanted Portion to the Landlord, the Tenant shall hand over vacant and peaceful possession of the Tenanted Portion after removing all his goods and belongings and thereafter shall have no right to enter into the Tenanted Portion and/or in the Said Premises.

7.1.3 The Tenant has paid and cleared all electricity bills, telephone bills and all other utility bills and there is no arrear in respect thereof.

7.1.4 The Tenant has not created any interest over his monthly tenancy and/or has not done any act or deed which may prejudicially affect the right of tenancy.

7.2 By Purchaser:

7.2.1 Upon execution hereof the Landlord shall have no other or further claim and/or demand whatsoever from the Tenant save and except as specifically stated herein.

7.2.2 The Landlord shall pay the Consideration to the Tenant in terms of the Payment Schedule below.   

8. Interpretation:

8.1 Number: Words denoting the singular number include, where the context permits and requires, the plural number and vice-versa.

8.2 Headings: The headings in this Memorandum are inserted for convenience only and shall be ignored in construing the provisions of this Memorandum.

8.3 Definitions: Words and phrases have been defined in this Memorandum by bold print and by putting them within brackets. Where a word or phrase is defined, other parts of speech or grammatical forms of that word or phrase shall have corresponding meaning.

1st Schedule

(Tenanted Portion)

……………………………………….................................……

2nd Schedule

(Payment Schedule)

…………………………………………………………………..

9. Execution and Delivery:

9.1 In Witness Whereof the Parties have executed and delivered this Memorandum on the date mentioned above.

____________________        ____________________

     [Tenant]                                   [Landlord]

       

Witnesses:

1. Signature: _________________________

Name:

Father’s/Husband’s Name:

Address:

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Relief u/s. 54F isn’t allowable if assessee owns more than one residential house.

There is no bar in section 54 or in section 54F against claiming exemption for time for the same property if the cost of the property is within the kimit arisen to the assessee. 

Where an assessee on date of transfer of original asset, owns more than one residential house, he is not eligible for deduction under section 54F, even if other residential house is owned by assessee wholly or partially.

In fact, conditions under both the section is different and therefore both these provisions are for different situation.  Hence, if conditions of the said provisions are fulfilled, claim of exemption shall lie even if only one property is purchased to claim the LTCG arisen on sale of different assets.  It is settled principal that section 54 & 54F are relief mechanism and therefore,if the conditions are fulfilled, the exemptions are allowable.

The basic question is whether exemption u/s 54 for 1st year & u/s 54f for 2nd year for the purpose of the same property is admissible or not ? There is nothing in the Act that prohibits claim under section 54 & 54F simultaneously.

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PAN is compulsory of Landlord if rent paid above 1 Lakh.

The Income Tax Department clarify regarding Quoting of PAN number of landlord is must when the salaried Employee (Taxpayee) claming rent exemption from Income Tax, amount of Rs. 100000 annualy or monthly Rs. 8334 or more in a current financial year under "House rent allowance" tax benefits.

The Salaried Employee (Taxpayee) when claiming Tax exemption from Gross Income with respect to House Rent Allowance received from the Employer is now required to report compulsory the PAN of the landlord to the employer, if the rent paid by the employee to the landlord exceeds Rs 1 lakh per annum or monthly Rs. 8334, along with the rent receipt, said Minister of Sate for Finance J D Seelam in a written statement in the Rajya Sabha on Tuesday.

He quoted a circular by the Central Board of Direct Taxes (CBDT) on the matter of deduction of tax at source during the payment of salaries.

"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 employees," he added.

In a separate response, Seelam said the number of tax assesses have increased manifold. In the past 15 years, the number of effective IT assesses has increased by more than three times from 1.16 crore as on March 1997 to 3.63 crore at the end of March 2012.

He also said 42,800 persons other than companies admitted to a taxable income exceeding Rs 1 crore.

"The Cabinet has approved the cadre restructuring of the Income Tax Department in May 2013. The implementation of the same is under progress," he said.

Additional 1,080 assessment units to be manned by around 20,000 more personnel have been created to meet the increasing number of IT assesses, he said.

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Conditions for Claim of Deduction of Interest on Housing Loan under section 24(b) for Asstt. Year 2014-15

Section 24(b) of the Act allows deduction from income from houses property on interest on borrowed capital as under:

1. the deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence. However, if it is actually not occupied by the employee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.
   
   
2. The quantum of deduction allowed as per table below:

Sl No	Purpose of borrowing capital	Date of borrowing capital	Maximum Deduction allowable
1	Repair or renewal or reconstruction of the house	Any time	Rs. 30,000/-
2	Acquisition or construction of the house	Before 01.04.1999	Rs. 30,000/-
3	Acquisition or construction of the house	On or after 01.04.1999	Rs. 1,50,000/-

In case of Serial No. 3 above

1. The acquisition or constructing of the house should be completed within3 years from the end of the FY in which the capital was borrowed. Hence it is necessary for the DDO to have the completion certificate of the house property against which deduction is claimed either from the builder or through self-declaration from the employee.
2. Further any prior period interest for the FYs upto the FY in which the property was acquired and constructed shall be deducted in equal installments for the FY in question and subsequent four FYs.
3. The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of Principal and Interest of the loan so repaid.

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Income Tax Implications on Closing One Housing Loan Account and availing another houseing loan for construction.

Housing Loan Assessee are provided with the leased accommodation by his/her employer and probably he may not be receiving the House Rent Allowance (HRA).

For the mass benefit, we are elaborating the provision related to availability of deduction to the salaried assessee towards the rent payment.

Assessee receiving HRA from Employer:
Salaried Assessees who are in receipt of HRA from an employer can claim an exemption u/s 10(13A) of the Income Tax Act-1961 read with Rule 2A of the Income Tax Rules, 1962. The least of following can be claimed as deduction u/s 10(13A):-

• 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;
• 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
• 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):

• “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.
• Exemption is not available where an employee lives in his own house, or in a house for which he doesn’t pay any rent.

Assessee not receiving HRA:
Any individual who is not in receipt of HRA from the employer can claim deduction towards rent payment for residential accommodation u/s. 80GG of the Income Tax Act.

The condition precedents for deduction u/s 80GG are as under:

• He has to prepare a declaration in Form No.10BA.
• He or his minor child, spouse or HUF of which he is a member, should not be owner of a house at the place where he ordinarily resides or performs his duties; or he should not be owner of any house at any other place, the income therefrom is to be determined under section 23(2) (a) or, as the case may be, under section 23(4) (a) (i.e., income from self-occupied house property).

Subject to compliance of the other stipulations mentioned above, housing loan assessee can claim deduction towards the rent paid for residential accommodation.

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