TAX BENEFIT ON HRA AND HOME LOAN -AVAILABLE OR NOT?

 

HRA – allowance is one of the components of salary package, which is normally offered to employees by their employers to meet the higher cost of renting a home. Tax exemption under Income Tax Act for HRA is allowed to salaried persons who are occupying a rented accommodation. It is being regulated by 2A of Income Tax Rules, 1962 and Section 10(13A) of the Income Tax Act, 1961. Accordingly, least of the following three options will be exempt from tax

• [a.) 50% of the basic salary and DA, where the residential house is situated at Mumbai, Kolkata, Delhi or Chennai and an amount equal to 40% of above salary where residential house is situated in any other place. 
• [b.] HRA actually received by the employee in respect of the period during which rented accommodation is occupied by the employee during the financial year
• [c.] the excess of rent paid over 10% of the salary. 

Some times, salaried persons who avail home loan for acquisition or construction of residential house properties but could not stay in such properties owing to employment or other reasons and they stay in rented houses. In such circumstance, when they are receiving a HRA - allowance from their employer, a question often arises

whether they can get exemption of HRA under section 10(13A) of the Act?, based on the rent actually paid by them as well as the interest payable on the housing loan taken by them towards acquisition or construction of a property.

To avail HRA benefit,

• salaried employee who is in receipt of HRA from his employer
• should be actually paying house rent for the rented premises which he has occupied and
• such rented premises must not owned by him. 

It is evident from the above section the exemption of HRA is available to an assessee so long as he occupies the rented premises which is not owned by him. At the same time, the assessee is not barred from claiming exemption under section 10(13A) read with rule 2A, because he be the owner of any other house property, which was acquired through housing loan. It is to be noted that provisions of deduction of interest on borrowed capital for the acquisition or construction of house property and exemption of house rent allowance are two different issues under the Act, as one would not influence other. The benefits accrue on account of availing home loan are interest payments which is exempted under section 24(b) and the principal repayment is exempted under section 80C of the Income Tax Act. Conversely, HRA benefit can also be availed by the assessee on fulfillment of certain circumstances depicted above.

Courtesy: http://www.simpletaxindia.org

Following deduction will be available from salary for ITax Rebate 1) Mileage 2)Compensation under voluntary retirement scheme; 3)Amount of gratuity received on retirement or death; 4)Amount received on commutation of pension

SALARY,ALLOWANCES,PERKS DIRECT TAX CODE

Dear Friends,

When I first read the Direct Tax code , Like other people I first read the New Tax Rate and published the same for you and all other website in www discuss benefits from direct tax code but now we will discuss here what have taken back from us. Remember as per Govt Statement tax revenue will Increase after implementation of new Direct Tax Code. In This post we will cover the salaried Class.

Under the Code, the salary will now include, inter-alia, the following:-

1. the value of rent free, or concessional, accommodation provided by the employer irrespective of whether the employer is a Government or any other person; (earlier nominal value for Govt Employees)(read earlier rules here:valuation of rent free accommodation)
2. the value of any leave travel concession;(earlier exempted up to 2 journey in four year block)(read earlier rules here: LTC Exemption
3. the amount received on encashment of unavailed earned leave on retirement or otherwise;(earlier exempted for 30 days for each year of service or maxi 3.00 Lakhs) (read earlier rules here:leave encashment )
4. medical reimbursement; and 
5. the value of free or concessional medical treatment paid for, or provided by,the employer.(read earlier rules here:valuation of medical facility)
6. The value of rent-free accommodation will be determined for all employees in the same manner as is presently determined in the case of employees in the private sector. The new regime of comprehensive taxation of perquisites across employees in all sectors of the economy will improve both the horizontal and vertical equity of the tax system.

Download Direct Tax code 2009 Download Direct tax code discussion paper Read Direct tax code Online

DOWNLAOD NEW TAX RATES OF INDIVIDUAL

Further the following deduction will be available from salary income

1. amount of professional tax paid;
2. transport allowance to the extent prescribed;
3. prescribed special allowance or benefit to meet expenses wholly and exclusively incurred in the performance of duties, to the extent actually incurred;
4. compensation under voluntary retirement scheme;
5. amount of gratuity received on retirement or death;
6. amount received on commutation of pension; and
7. pension received by gallantry awardees.

Further Item at Sr No 4,5,6 would  be available to the extent the amounts are paid to, or deposited in a Retirement Benefits Account. The amounts received from an approved superannuation fund, hitherto exempt from income tax, will henceforth also be treated in the same manner.

So there will be no exemption for House rent Allowance (HRA) (read HRA present rule) Further exemption for following allowances has also not been provided in new Direct tax code as compare to present tax provisions.

1. entertainment allowance
2. children education allowance
3. children Hostel allowance
4. HRA (house rent allowance)

The list is not exhaustive but we can say that other than deduction prescribed above no deduction from salary income is allowed. Further EET regime has been now fully introduced for all type of savings scheme which we discuss in separate post.

E: exempt at the time of Investment

E:Interest ,bonuses ,increments during the period of investment will not be taxed at all

T:full amount received at the time of Maturity is taxable in the hands of assesses.

Railways Staff Pension, HRA, Transportation Allowance

Railways Staff Pension, HRA, Transportation Allowance

Implementation of Government's decision on the recommendations of the Sixth Central Pay Commission- 

1) Revision of provisions regulating pension/ gratuity/ commutation of pension/ family pension/ disability pension. 

Click Following Link:

http://www.indianrailways.gov.in/DEPTTS/finance/Fin-estb-cir/rbe-112.pdf

(RBE No. 112 Dated 15/09/2008)

2)Recommendation of the Sixth Central Pay Commission - 

Grant of Transport Allowance to Railway Employees.

Click Following Link:

http://www.indianrailways.gov.in/PC/PC6/6pc_TA.pdf

(RBE No. 111 Dated 12/09/2008)

3)Decision of the Goverment on the recommendations of the Sixth Central Pay Commission relating to grant of Compensatory (City) Allowance and House Rent Allowance (HRA) to Railway employees

Click Following Link:

http://www.indianrailways.gov.in/PC/PC6/rbe-110.pdf

(RBE No. 110 Dated 12/09/2008)