Tag Archives: SALARY

All about HRA : CAROCKSTARS


HOUSE RENT ALLOWANCE

 

ALLOWANCES means a fixed sum paid to an employee for a specific purpose without confirming the end utilization. Under the income tax Act,1961,allowance is taxable on due or receipt basis, whichever is earlier.

 

Various types of allowances are as follows:-

¤House Rent Allowance, sec 10(13A) Rule 2A

¤Special Allowance, sec 10(14) Rule 2BB

-> Personal Allowance

-> Allowance for official duty

¤ Foreign Allowance, sec 10(7)

¤ Any other allowance HOUSE RENT ALLOWANCE SEC 10(13A) RULE 2A Payment by the employer to the employee in cash so that the employee may take a house on rent is called House Rent Allowance.

Example: If Mr. Kushal is employee in Big boss ltd. and Mr. Andy his employer has paid him ₹5000 p.m. for taking a house on rent, it will be called House Rent Allowance.

 

 

House rent allowance is exempt to the extent of the least of the following:-

i)             House rent allowance received

ii)            Rent paid over 10% of retirement benefit salary due to the accessee for the relevant period.

iii)           50% of retirement benefits salary in case of Bombay, Calcutta, madras and delhi. 40% of retirement benefits salary in case of any other place for valid relevant period.

 

Inhe bhi yaad rakho!!

* exemption is not available to an accessee who lives in his own house or in al house for which he has not incurred expenditure of rent.

* Relevant period means the period during which the said accommodation was occupied by the accessee during the previous year.

* Retirement Benefit Salary shall include :

1) Basic Pay

2) Dearness Allowance, if the terms of employment so provided.

3) Commission if it is paid as fixed percent of the turnover as decided in GESTETNER DUPLICATORS PVT. Ltd v CIT, (1979) 117 ITR 1 (SC)

*salary shall be computed on due basis i.e. Any arrear or advance shall not be included.

 

 

 

 

 

 

Example: Mr. Chulbul pandey is employed in dabangg ltd and is posted at agra. He is getting basic pay ₹30000 p.m. dearness allowance ₹20000 p.m. Where 40% of DA forms part of salary. Employer has also paid Mr. Chulbul pandey a bonus of ₹3000 p.m. and commission @ 3% on sale turnover of ₹5000000. House Rent Allowance is ₹20000 p.m. Whereas rent paid by mr. Chulbul pandey is ₹12000 p.m. Compute taxable salary of mr. Chulbul pandey for AY 13-14

Samadhaan: Calculation of taxable HRA :-

HRA will be exempted to the extent of the least of the following:

1) HRA RECIEVED =₹20000*12 =₹240000

2) RENT PAID OVER 10% OF RETIREMENT BENEFIT SALARY DUE TO ACCESSEE

=> Retirement benefit salary Basic pay 30000*12 = 360000

DA 40%(20000*12) = 96000

Commission 3%(5000000) 150000 = 606000

10% of RBS= 10%(606000) =₹60600

so, rent paid over 10% of RBS due to accessee =(12000*12) – (60600) =₹83400

 

3) 40% of RETIREMENT BENEFIT SALARY =40% (606000) = ₹242400

Therefore, HRA exempted = ₹83400

so, HRA RECIEVED 240000 (-) HRA EXEMPTED 83400 TAXABLE HRA 156600

 

CALCULATION OF GROSS SALARY:-

Basic pay                    360000

Dearness allowance     240000

Bonus                         36000

Commission                 150000

House rent allowance   156600

GROSS SALARY            942600

IW07_newHRA_calcul_1419444g

 

5) If there is any change in HRA, rent paid, retirement benefit salary or the place of posting during the year, there will be seperate calculation for each of such change.

Example: Mr. Khiladi is employed in Boss ltd. And is getting basic pay ₹20000 p.m. HRA ₹10000 p.m. He has paid rent ₹1000 p.m. from 1st april 2012 to 30th september 2012 and thereafter rent was paid at ₹3000 p.m. Compute the taxable portion of HRA.

Samadhaan: FROM 1-4-12 TO 30-9-12 Least of the following is exempt

a) ₹10000*6 =60000

b) (₹1000*6) – [10%(20000*6)] =₹6000 – ₹12000 =NIL

c) 40%(20000*6) =₹48000

Least = Nil

so, Rent recieved = ₹60000 (-)Exempt = NIL Taxable HRA = ₹60000

FROM 1-10-12 TO 31-3-13 Least of the following is exempted

a) ₹10000*6 =₹60000

b) (3000*6) – [10%(20000*6)] = ₹6000

c) 40%(20000*6) = ₹48000

Least = ₹6000

So, Rent recieved = ₹60000 (-) HRA exempted = (₹6000) Taxable HRA = ₹54000

Therefore, total taxable HRA for the AY 13-14 = ₹ (60000 54000) = ₹114000

 

ADDITIONAL DEDUCTION OF INTEREST ON HOME LOAN (SECTION 80EE)


A new section has been introduced in Budget 2013. It provides that while computing the total income of an assessee, being an individual there shall be deducted interest payable on loan taken by him from any financial institution for the purpose of acquisition of residential house property. This section allows for Additional deduction of Rs. 1 Lakhs for the Assessment year 2014-15 (FY 2013-14).
CONDITIONS
Deduction under this section shall be subject to the following conditions:-
• The value of house property does not exceed Rs.40 Lakhs.
• The assessee does not own any other house property on the date of sanction of loan.
• Loan must be from eligible financial institutions.
• Loan is sanctioned during the period beginning from 1st April, 2013 and ending on 31st March, 2014.
• Loan sanctioned does not exceed Rs. 25 Lakhs.
• Assessee is a first time buyer of House Property.
It is also provided that where a deduction under this section is allowed for any assessment year in respect of interest, deduction shall not be allowed in respect of such interest under any other provisions of the Income Tax Act for the same or any other Assessment year.
ELIGIBLE FINANCIAL INSTITUTIONS
The Financial institution providing loan must be either a Bank or a Public company formed with the main object of providing long term Housing Finance.
Note:- Deduction will be allowed only if loan is taken from Public company.
OVER AND ABOVE THE DEDUCTION OF Rs. 1,50,000
Deduction u/s. 80EE will be over and above the deduction of Rs. 1,50,000 allowed for self occupied properties under section 24 of the Income Tax Act.
ONE TIME DEDUCTION
This scheme is for one year only. In case where the interest payable for the previous year relevant to assessment year is less than one lakh rupees then balance can be claimed in AY 2015-16 i.e. FY 2014-15.

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Salary earners upto Rs 5 lakh need to file IT return: CBDT


Salaried with total income upto Rs. 5 lakh also to FIle IT return for A.Y. 2013-14.

CBDt has vide its press release dated 22.07.2013 clarified that exemption from filing return of income for salaried employees having total income upto Rs. 5 lakhs including income from other sources upto Rs. 10,000/- was only for assessment year 2011-12 and 2012-13 respectively. The exemption was given considering ‘paper filing of returns’ and their ‘processing through manual entry’ on system.
However, this year the facility for online filing of returns has been made user-friendly with the advantage of pre-filled return forms. These E-filed forms also get electronically processed at the central processing centre in a speedy manner. Hence, the exemption provided during the last two years is not being extended for assessment year 2013-14.

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