News Update

GST: A Frightening but Fascinating Future world…! – Part IV (See 'TOG INSIGHT')Bharat -22 follow -on offer attracts Rs 140 bn24 labs set up for imparting maritime skillIndia aims to open Chabahar Port in Iran by 2019Infra financing - policy makers to hear PM on MondayImport Prohibition - Reference to the Patents Act, 1970 omitted from notification 51/2010-Cus(NT)Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 amendedImport of Milk and Milk Products from China - import prohibition extended till 23.12.2018I-T - Tax deducted at source on income of charitable trust cannot be treated as taxable income: ITATGST - Howrah Commissionerate detects Rs 43 Crore tax evasion through fake invoicesGeM - Transactions worth Rs 8700 Crore done in short time, says PMRanchi NCB seizes 400 kg ganja from truck in Bokaro Steel CityIndia to make Chabahar Port operation by 2019: GadkariST - For any inaction on part of Revenue to submit Final Verification Report, petitioners cannot be made to suffer - matter remanded to Settlement Commission: High CourtGST: A Frightening but Fascinating Future world…! – Part III (See 'TOG INSIGHT')I-T - Application of fund for benefit of earthquake victims and its communication to donee before stipulated date, is sufficient for charitable trust to avail benefit of exemption u/s 80G(5C): HCPanama Papers - Leak-I - Out of 426 only 76 cases found actionable: GovtST - Taxability is not determined by section 67 of Finance Act, 1994 but by coverage in section 65: CESTATCIC decides proceedings not to abate even if complainant diesGovt sets up Panel to update Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business12 lakh pax electric cars sold in 2017; up by 58% from 2016: UNCommerce Department to get new homeCentre invites views on draft CSR guidelinesCanada passes bill to legalise use of marijuana from Oct 17, 2018Govt appoints Mr M K Sinha as new Joint Secy - TRU-IIDrive Against Shell Companies - A cul-de-sac!Liquor licences: Undoubtedly Taxable before as well as after GST Roll outMCA invites comments on Draft on cross-border insolvencyCBDT notifies PFC & Railway Finance Corp 54EC Capital Gains Bonds
 
Direct Taxes - Budget Suggestion

JANUARY 12, 2018

By Maninder Jain

PRESENTLY salaried people can avail HRA deduction if they are staying in rented property. They can claim HRA deduction as per the following Formula (as per SEC 10 (13A) READ WITH RULE 2A) :

2A. The amount which is not to be included in the total income of an assessee in respect of the special allowance referred to in clause (13A) of section 10 shall be -

(a) the actual amount of such allowance received by the assessee in respect of the relevant period; or

(b) the amount by which the expenditure actually incurred by the assessee in payment of rent in respect of residential accommodation occupied by him exceeds one-tenth of the amount of salary due to the assessee in respect of the relevant period; or 3

[(c) an amount equal to-

(i) where such accommodation is situate at Bombay, Calcutta, Delhi or Madras, one-half of the amount of salary due to the assessee in respect of the relevant period; and

(ii) where such accommodation is situate at any other place, two-fifth of the amount of salary due to the assessee in respect of the relevant period,]

(d) 4 [***]

whichever is the least.

However certain class of employees are mis-utilising the deduction by claiming excessive rent payment to their own relatives which is defeating the intention of law. Income Tax tried to plug some loophole by taking PAN no. of Landlord. However, this only plugged the loophole by checking whether same Income has been shown by Landlord or not. But in case of payment to Relative, usually employee pay Excessive Rent to their Non Working relative so the marginal tax rate is very less.

The Suggestion is if we add the following limit in Rule 2A:

(d) Fair rent of the property in case the rent is paid to Relative. (“Relative” is already defined in Income Tax Act) This will plug the Loophole for those persons who claim excessive deduction of HRA by paying exorbitant rent of property.


POST YOUR COMMENTS