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CA Vishnu Ram
Enlightened
Asked: In:

  1. Ramesh Sharma Enlightened

    In case of receipt of past salary, salary in advance or receipt of family pension in arrears, tax relief under section 89(1) is allowed. Here’s how you can calculate the tax relief as per below steps – Step 1: First calculate the tax payable on the total income, including additional salary – in theRead more

    In case of receipt of past salary, salary in advance or receipt of family pension in arrears, tax relief under section 89(1) is allowed.

    Here’s how you can calculate the tax relief as per below steps –

    Step 1:
    First calculate the tax payable on the total income, including additional salary – in the year it is received.

    Step 2:
    Now calculate tax payable on the total income, excluding additional salary in the year it is received.  You need to subtract the arrear received from the employer from the total salary received

    Step 3:
    Calculate the difference between Step 1 and Step 2.
    This will give you the additional tax liability arrived due to arrears of income.

    Step 4:
    Now calculate the tax payable on the total income of that year to which the arrears relate, excluding arrears.

    Step 5:
    Calculate tax payable on the total income of that year to which the arrears relate, including arrears

    Step 6:
    Calculate the difference between Step 4 and Step 5.
    This will calculate the actual tax liability in any past year pertaining to which arrears have been received in the current year, had the full arrears received in the same past year.

    Step 7:
    Excess of the amount at Step 3 over Step 6 is the tax relief that shall be allowed. ( Step 3 minus Step 6). If the amount in Step 6 is more than the amount in Step 3, no relief shall be allowed.

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CA Sanjiv Kumar
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    National Pension Scheme is a good option for saving as well as tax benefit sources. A tax exemption of Rs.1.5 lakh can be claimed on the employee’s and employer’s contribution towards the National Pension System (NPS). However, employees can get an additional tax benefit of Rs 50000 for self contribRead more

    National Pension Scheme is a good option for saving as well as tax benefit sources. A tax exemption of Rs.1.5 lakh can be claimed on the employee’s and employer’s contribution towards the National Pension System (NPS). However, employees can get an additional tax benefit of Rs 50000 for self contribution in NPS. Tax benefits can be claimed under Section 80CCD(1), 80CCD(2), and 80CCD(1B) of the Income Tax Act. Following is a brief description of all these sections:

    • 80CCD(1), This section is a part of Sec 80C. It covers self-contribution in NPS made by the employee. Salaried employees can claim a maximum deduction of 10% of their salary, while self-employed individuals can claim up to 20% of their gross income.
    • 80CCD(2), is also a part of Section 80C. It includes the employer’s contribution towards NPS. This benefit cannot be claimed by self-employed individuals. The maximum amount that an individual is eligible for deduction is either the employer’s NPS contribution or 10% of basic salary plus Dearness Allowance (DA) whichever is higher.
    • 80CCD(1B), under this section, individuals can claim an additional tax benefit up to Rs.50,000 for any other self-contributions as NPS tax benefit.

    Therefore, individuals can claim up to Rs.2 lakh as tax benefits under NPS.

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CA Vishnu Ram
Enlightened
Asked: In:

  1. CA Manish Kumar Gupta Enlightened

    Hi, The answer is a big No. If you are paying rent but not receiving house rent allowance then you are allowed to claim deduction under section 80GG subject to your spouse or children are not owning a house property in the place of employment. And, in case you are paying rent and receiving HRA, thenRead more

    Hi,

    The answer is a big No.

    If you are paying rent but not receiving house rent allowance then you are allowed to claim deduction under section 80GG subject to your spouse or children are not owning a house property in the place of employment.

    And, in case you are paying rent and receiving HRA, then you can claim a deduction of such HRA as per section 10(13A).

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CA Vishnu Ram
Enlightened
Asked: In:

  1. Ramesh Sharma Enlightened

    Yes you can claim the exemption of HRA as per section 10(13A) as it has no bearing on your home loan interest deduction. The deduction of Interest on the home loans can be taken under section 24b. so, Both can be claimed. In fact, the interest paid on the home loan can be considered as the cost of tRead more

    Yes

    you can claim the exemption of HRA as per section 10(13A) as it has no bearing on your home loan interest deduction. The deduction of Interest on the home loans can be taken under section 24b.

    so, Both can be claimed.

    In fact, the interest paid on the home loan can be considered as the cost of the acquisition of property at the time of selling the property and calculating capital gain.

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CA Vishnu Ram
Enlightened
Asked: In:

  1. Kirti Agarwal Beginner

    Exemption of HRA u/s 10 (13A) can be claimed only if it is mentioned in form 16. If it does not mention in form 16A that means your employer has not provided a separate component of HRA. HRA can be claimed when a separate component towards HRA is given by the employer in your salary. However, In absRead more

    Exemption of HRA u/s 10 (13A) can be claimed only if it is mentioned in form 16. If it does not mention in form 16A that means your employer has not provided a separate component of HRA.

    HRA can be claimed when a separate component towards HRA is given by the employer in your salary. However, In absence of it, you can claim for rent paid under section 80GG.

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CA Vishnu Ram
Enlightened
Asked: In:

  1. Kirti Agarwal Beginner

    Rent paid to parents can also be considered to take an exemption of HRA. It is not fundamentally different with HRA paid to somebody else. There is no is also Let’s understand this with an example. You can pay rent to your parents and can claim the exemption of HRA as per section 10(13A). But beforeRead more

    Rent paid to parents can also be considered to take an exemption of HRA. It is not fundamentally different with HRA paid to somebody else.

    There is no is also Let’s understand this with an example.

    You can pay rent to your parents and can claim the exemption of HRA as per section 10(13A).

    But before that you must ensure to follow the following procedure:

    1. Sign a rental agreement with your parents for the rental property.
    2. Transfer money to your parents every month.
    3. Ensure that your parents report the rent paid by you as income in their income tax returns.
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CA Vishnu Ram
Enlightened
Asked: In:

  1. Kirti Agarwal Beginner

    House Rent Allowance Salaried employees who receive house rent allowance as a part of salary and incurred payment towards rent can claim HRA exemption to reduce their taxable salary wholly or partially. The deduction of HRA can be claimed under section 10-13A of the Income Tax Act in the following mRead more

    House Rent Allowance

    Salaried employees who receive house rent allowance as a part of salary and incurred payment towards rent can claim HRA exemption to reduce their taxable salary wholly or partially.

    The deduction of HRA can be claimed under section 10-13A of the Income Tax Act in the following manner.

    The least of the below is allowed as HRA exemption:

    • Actual HRA received by the employee
    • 40 % of salary for non-metro city or 50 % of salary if the rented property is in Metro cities like Mumbai,Delhi, Kolkata and Chennai)
    • Actual rent paid minus 10% of salary.

    Important Points:

    1. Here Salary would include basic salary, dearness allowance and fixed percentage of commission.
    2. HRA in excess of the above exemption will be taxable under the heads of salary income.
    3. Documents like rent receipts and rental agreements will be required to be submitted to the employer for claiming the deduction for the house rent allowance.
    4. If the payment of rent is more than Rs 1 lakh per annum, then the PAN of the house owner will be required to be submitted. On the basis of these proofs, employers would provide a deduction for HRA in form 16.
    5. In case, HRA exemption has not been provided by the employer, the Employee, himself can claim exemption of such HRA at the time of filing of Income Tax Return, subject to the employer has mentioned the HRA amount separately in form 16A.

     

     

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Manish Kumar Gupta Enlightened
    This answer was edited.

    Hi, If you are paying rent but not receiving HRA from your employer, then still you can take benefit in Income Tax for the amount of Rent paid. You need to satisfy the following conditions: You are self-employed or salaried You have not received HRA at any time during the year for which you are claiRead more

    Hi,

    If you are paying rent but not receiving HRA from your employer, then still you can take benefit in Income Tax for the amount of Rent paid.

    You need to satisfy the following conditions:

    1. You are self-employed or salaried
    2. You have not received HRA at any time during the year for which you are claiming 80GG
    3. You or your spouse or your minor child or HUF of which you are a member – do not own any residential accommodation at the place where you currently reside, perform duties of office, or employment or carry on business or profession.

    The deduction can be claimed under Section 80GG as follows:

     

    The lowest of the following can be claimed as a deduction:
    1 Rs 5,000 per month;
    2 25% of adjusted total income*;
    3 Rent paid minus 10% of adjusted total Income*
    *here Adjusted Total Income means Total Income minus long-term capital gain, short-term capital gain and deductions 80C to 80U.

    If you own any residential property at any place other than the place mentioned above, then you should not claim the benefit of that property as self-occupied. The other property would be deemed to be let out in order to claim the 80GG deduction.

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CA Vishnu Ram
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    interest earned on account of funds borrowed for specific purpose shall not be taxed but  interest received on investment of surplus funds is taxable in other income. In the matter of HP Power Transmission Corporation Ltd Vs DCIT, ITAT gave order. Assessee company HP Power Transmission Corporation LRead more

    interest earned on account of funds borrowed for specific purpose shall not be taxed but  interest received on investment of surplus funds is taxable in other income.

    In the matter of HP Power Transmission Corporation Ltd Vs DCIT, ITAT gave order.

    Assessee company HP Power Transmission Corporation Limited (HPPTCL), a Government undertaking, was yet to start commercial operation. As per details of “Other income”, assessee had earned interest on bank deposit during period relevant to AY. Interest was earned on surplus funds available with assessee company but it was not offered for taxation. AO rejected assessee’s submission in that regard and interest was assessed to tax in hands of assessee as ‘income from other sources”. As CIT (A) upheld AO’s order, assessee filed present appeals. Both AO and CIT (A) had held that issue had been decided against assessee by ITAT in preceding years and facts of relevant AY were not different from preceding AYs.

    On Appeal, ITAT held that,

    Whether interest earned on account of funds borrowed for specific purpose can be taxed – NO: ITAT.

    Regarding interest income earned, the relevant fact was nature and composition of interest income earned, i.e, surplus funds and specific purpose funds and not factum of loan. For earlier AY in assessee’s case, when interest was earned by assessee on surplus funds available with it, issue was decided against assessee. For AY in case of HP Power Corporation, assessee had borrowed certain amount from Asian Development Bank (ADB) for specific project and on account of delay in project, parked the amount in temporary investments in FDRs. Interest earned thereon was held by ITAT to be not taxable. Thus, facts during the year were partly different with funds having been borrowed for specific purpose and parked in FDRs as temporary investments on account of delay in project. Thus, distinction in facts in the aforestated two orders was that while in case of assessee in earlier years, interest was found to be earned on surplus funds and hence held taxable, in case of HP Power corporation, interest was earned on specific purpose funds deposited in FDRs on account of delay in execution of projects and therefore, held not taxable. It was thus held that interest received to extent of ADB loan parked in investments in FDRs was not revenue in nature and not liable to be taxed under the head “income from other sources”.

    • ITA No. 789/Chd/2019
    • ITA No. 790/Chd/2019
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CA Vishnu Ram
Enlightened
Asked: In:

  1. CA Manish Kumar Gupta Enlightened

    Hi, Pension received by a family member is taxed under the head “income from other sources”. It is taxed in the hands of the receiver. Commuted Pension i.e lump sum amount of pension is not taxable. uncommuted pension received by a family member is exempt to a certain extent. Rs. 15,000 or 1/3rd ofRead more

    Hi,

    Pension received by a family member is taxed under the head “income from other sources”. It is taxed in the hands of the receiver.

    • Commuted Pension i.e lump sum amount of pension is not taxable.
    • uncommuted pension received by a family member is exempt to a certain extent. Rs. 15,000 or 1/3rd of the uncommuted pension received – whichever is less is exempt from tax.

    For example – If a family member receives a pension of Rs 1,00,000 during the year then the exemption available is least of – Rs 15,000 or Rs 33,333 (1/3rd of Rs 1,00,000). Thus the taxable family pension will beRs.85,000 (Rs 1,00,000 – Rs 15,000)

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