Income tax calculator: Can taxpayers claim HRA exemption on rent paid to spouse?

 









The income tax department has notified income tax return (ITR) forms and taxpayer are busy calculating their tax saving investments and expenses, which they can claim for exemption in their ITR for AY 2022-23 after the due date for TDS return filing i.e. 31st May 2022. However, while claiming HRA exemption, taxpayers are advised to think of innovative methods that can help them save income tax outgo. Taxpayers are also advised to know that it is up to the conscience of income tax officer whether it grant your tax exemption claim or not. House Rent Allowance (HRA) is a classic example of it. As per the Section 10 of income tax act, a taxpayer can claim income tax exemption if it is paying rent for an accommodation which is not owned by it. So, if a taxpayer is residing in a house owned by its wife or husband, can claim HRA exemption under income tax act provided he or she is getting HRA in its monthly income.

Explaining the income tax rule on HRA exemption, Pankaj Mathpal, MD & CEO at Optima Money Managers said, "As per the HRA exemption rule under Section 10 of the income tax act, if a person has HRA income, then it can claim HRA benefit on the rent paid for the accommodation not owned by it. However, the income tax exemption rule holds well in the case of rent paid to parents, brother or sister. However, in the case of spouse, it's not that simple."

Explaining the twist involved on HRA exemption for rent paid to spouse, Mumbai-based tax expert Balwant Jain said, "The HRA exemption rule under Section 10 should not be used for tax evasion and it depends upon the conscience of income tax officer to grant HRA exemption, even when the claim fulfills the rule. The taxpayer should simply understand that one can't claim HRA exemption under income tax act on the rent paid to spouse if the house has been bought through the income of the taxpayer. So, an earning individual buying house in the name of his housewife is not eligible to claim HRA exemption on the rent paid to his wife because actual purchase of teh house is taxpayer himself."

In case of taxpayer living in the accommodation owned by its parents, brother or sister, it can claim HRA exemption on the rent paid during the whole financial year. But the rent should not be more than 50 per cent of its basic salary plus DA (Dearness Allowance) in metro cities or 40 per cent of its basic salary plus DA in on-metro cities, exemption limit of the rent i.e. HRA mentioned in one's CTC or 10 per cent of the basic salary plus DA of one's salary, which ever is lower," said Pankaj Mathpal of Optima Money Managers.

"If the income tax officer finds that rent paid to wife has been claimed for HRA exemption under income tax act as a case of tax evasion, then it may go to the litigation. So, taxpayers are advised to avoid claiming HRA exemption under income tax act for rent paid to wife, if the house has been bought from the income of taxpayer himself," concluded Balwant Jain.

Comments

Post a Comment

Popular posts from this blog

Centre appeals against ruling on levy of GST on maintenance charges to resident welfare associations

Image
  The Centre has preferred a writ appeal before the Madras High Court against a single judge's order that flat or villa owners paying more than ₹7,500 a month towards maintenance charges to their residents’ welfare associations must pay Goods and Services Tax (GST) at the rate of 18% only for the amount exceeding ₹7,500 and not for the entire monthly contribution. Justices T.S. Sivagnanam and Sathi Kumar Sukumara Kurup on Wednesday allowed an application filed by the Centre to dispense with production of a certified copy of the judgment passed by Justice Anita Sumanth recently and directed the Registry to list the appeal for admission in the usual course. Justice Sumanth had in July this year quashed an order passed by the Authority for Advance Ruling (AAR) on June 21, 2019 as well as a consequent circular issued by the Department of Revenue under the Union Finance Ministry on July 22, 2019 since both of them had insisted upon collecting GST for entire monthly contribution. The jud...
Read more

Seven key things to know before filing income tax return (ITR) for FY21

Image
  The last date to file income tax return for the financial year 2020-21 has been extended to September 30, 2021. Although there is more than two months left for the deadline to end, it is always recommended to complete the task as soon as possible and not to wait for the last minute. Worth mentioning here is that the income tax department last month launched a new e-filing portal (www.incometax.gov.in) to speed up the processing of tax returns. The I-T department will soon launch a mobile application, having all the features of the new portal. This year taxpayers have to take care of the following changes in the ITR filing process. 1) A new utility named JSON has been launched for filing tax return forms for FY21. At present, only three forms, ITR 1, 2 and 4 have been released. These new forms will import pre-fill data such as personal details, salary income, dividend income, interest income, capital gains and all the information available in Form 26AS. 2) Taxpayers will have the ...
Read more

Income Tax Dept detects ₹350 cr unaccounted cash receipts after raid in Rajkot

Image
  The Income Tax Department carried out a search and seizure operation on a real estate group based in Gujarat's Rajkot and found unaccounted cash receipts in various projects of approximately ₹350 crore, the Finance Ministry said on Friday. The group is among Gujarat’s prominent real estate builders and developers and is actively engaged in real estate, construction and land trading businesses in and around Rajkot. More than 40 premises were covered in the search operation. During the course of operation, many incriminating documents and digital evidences were seized indicating involvement of the group in unaccounted transactions. The IT sleuths found substantial evidence of transactions outside the regular books of accounts, unaccounted cash expenses, cash advances received and interest paid in cash. Evidence of on-money payments in real estate projects-flats, shops and land deals has also been found. Total unaccounted cash receipts in various projects of approximately ₹350 crore...
Read more