If annual rent paid by the employee to his/her land lord 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.
Under section 10(13A) of the Income Tax Act, any special allowance specifically granted to an Employee (i.e. Assessee) by his employer to meet expenditure incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the Employee (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, 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 (i.e. HRA) received by the employee (assessee)in
respect of the relevant period i. e. the period during which the accommodation
was occupied by the employee (assesse) during the financial year; or
(b) The actual
expenditure incurred in payment of rent in excess of 1/10 of the salary due for
the relevant period; or
(i) Where such
accommodation is situated in Mumbai, Kolkata, Delhi or Chennai, 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 employee (assessee)
subject to the limits laid down in Rule 2A, would be eligible for exemption
from income-tax.
Thus, HRA granted to
an employee who is residing in a house/flat owned by him is not exempt from
income-tax.
The Employer (disbursing
authorities)should satisfy themselves in this regard by insisting on production
of evidence of actual payment of rent before excluding the HRA 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.
Resource:- www.incometaxindia.gov.in (CIRCULAR NO : 08
/2013, F.No. 275/192/2013-IT(B) dated the 10th October, 2013)
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