• HRA exemption for maintenance paid for rented house

My company pays me Rs 30,000 as HRA. I stay in a rented house and I pay 35,000 monthly as rent. But as per my landlord's instruction(he also made the agreement in similar fashion, one rental agreement and another maintenance agreement), I am paying 5000 to his bank account and 30,000 to his sons bank account every month. Every month he is giving me a receipt of 5000 as rent and his son is giving me a receipt of 30,000 for the maintenance of this same house. Now is there anyway I can produce the entire 35,000 for tax exemption under HRA (of course as per that 3 HRA qualifying rules)? Thanks in advance. If possible pls quote the relevant taxation rule or even better please provide some URL to the rule.
Asked 9 months ago in Property Law from Kolkata, West Bengal
Religion: Hindu
1. The said maintenance amount is being paid by you to his son every month for maintaining the same rented house as per the agreement executed by and between both of you,

2. This monthly maintenance amount will be considered as part of the total rent for the purpose of claiming relief from I.Tax.

 
Krishna Kishore Ganguly
Advocate, Kolkata
12106 Answers
231 Consultations
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1)The exemption on HRA is covered under Section 10(13A) of the Income Tax Act   the entire HRA is not deductible. HRA is an allowance and is subject to income tax

2)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 his employer.


3)the exemption of HRA will be available up to the the minimum of the following three options:

Actual house rent allowance received from your employer
Actual house rent paid by you minus 10% of your basic salary
50% of your basic salary if you live in a metro or 40% of your basic salary if you live in a non-metro
- 


4) exemption would be admissible only towards Rent payment and not payment done towards electricity, maintenance charges etc. -
Ajay Sethi
Advocate, Mumbai
23235 Answers
1219 Consultations
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While HRA is a major tool to save tax, it is equally important to keep every documentation properly, in case demanded by the tax authority. HRA is received by the salaried class and  a deduction is permissible under Section 10(13A) of the Income Tax Act, in accordance with Rule 2A of the Income Tax Rules.In Kolkata, Delhi or Chennai, the tax exemption on HRA is 50 percent of the basic salary .In order to claim the exemption, the rent must actually be paid for the rented premises which you occupy. For the purpose of this deduction, salary means basic salary and includes dearness allowance, if the terms of employment provide it, and commission based on a fixed percentage of turnover achieved by the employee.
Ajay N S
Advocate, Ernakulam
1915 Answers
19 Consultations
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The receipt which is given by his sons is for maintenance and not rent, an arrangement that you should not have agreed to in the first place. Exemption is admissible only towards rent payment and not payment done towards electricity, maintenance charges etc. If however, you make the lump-sum payment to the landlord towards rent who in turn makes the payment of maintenance charges or others, the exemption u/s 10(13A) could not be denied, whereas you make payment separately for maintenance. So only 5000 rental which you pay qualifies for exemption. 
Ashish Davessar
Advocate, Jaipur
18102 Answers
448 Consultations
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Hi
 first of all you should not have entered into an agreement like this where you pay 5,000/ for rent and 30,000/ for maintenance. since the maintenance charges are given and receipts issued under the head of maintenance charges it will not attract rent charges under sec.10(13A), unless you give it as a lump sum amount and the landlord issue a receipt for rent. the question is what is treated as rent, Maintenance charge and electricity , water etc will not constitute "Rent", unless it is made as one receipt as rent.
The HRA deduction is based on salary, HRA received, the actual rent paid and place of residence. The place of residence is important. For Mumbai, Kolkata, Delhi or Chennai, the tax exemption on HRA is 50 percent of the basic salary, while for other cities it is 40 percent of the basic salary.
Thresiamma G. Mathew
Advocate, Mumbai
1316 Answers
85 Consultations
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