Saayam works in a private company in Delhi. His company provides him with house rent allowance orHRA. But he lives with his parents instead. Can he claim HRA while living with parents? he asked us. Simple answer is YES he can. Long answer to Can he claim HRA while living with his parents is explained in article below.
Overview of HRA
Employees generally receive a house rent allowance (HRA) from their employers. House Rent Allowance or HRA is given by the employer to the employee to meet the expenses of rent of the accommodation which the employee has taken for his residential purpose. Our article HRA Exemption,Calculation,Tax and Income Tax Return talks about it in detail.
- When you are claiming HRA exemption it is assumed that you are also staying at same place. 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. If you stay in your own house, or in a house where you don’t pay rent, you cannot claim the exemption.
- There must be a rent agreement. Office needs the agreement, the rent receipts. Now Even Income Tax Department has standardized the way of declaring HRA by introducing Form 12BB. Failure to have a rent agreement signed by both the parties will lead to legal inefficiencies in the case of a dispute.
- You should be able to prove that you have paid the rent every month. That is why employer needs rent receipts. You transfer money to landlord every month through cheque or bank transfer, so that it is easy to prove, if required.
- Landlord’s PAN is mandatory if you want to avail HRA exemption and you pay rent of over Rs 1 lakh a year or rent is more than Rs 8,333 per month. Landlords without a PAN must be willing to give you a declaration.
- If you pay rent to your spouse, this does not qualify for HRA exemption, because as per income tax department you are supposed to stay with your spouse!
- You can claim exemption on rent paid to others including parents, brother, sister in-laws etc.
- Tax benefits for home loans and HRA are two separate aspects. So if you’re a home-owner and you are paying back your home loan, you can also claim HRA if you live in a rented property
- When you are calculating HRA for tax exemption, you take into consideration four aspects, which are
- Basic Salary
- HRA allowed
- Actual rent paid
- Place of residence i.e where you reside, a metro or non-metro city. Tax exemption for HRA for a metro city(Mumbai, Kolkata, Delhi or Chennai) is 50% of the basic salary, while that for non-metro cities is 40% of the basic salary.
- Rental Income is taxable. The owner(s) has to show the rent received as rental income in their income tax returns. If the house is let out i.e given on rent or is vacant ,which is considered as deemed to be let out. Our article Tax and Income from Let out House Property discusses it in detail with examples While calculating the taxable value of rental income, various deductions are available. It includes:
- Standard deduction , a flat 30% of the annual rent as deduction is for maintenance expenses such as repairs, insurance, etc., irrespective of the level of actual incurred expenditure.
- Municipal taxes paid to the local authority
- Interest paid on a loan taken for construction, repairs, acquisition, or renewal of the property
- Pre-construction period interest deduction (available as deduction in five instalments from year subsequent to construction completion year).
- Additionally, any repayment of principal amount against housing loan taken for such property is also eligible for deduction under section 80C (maximuum deduction under this section is Rs.1.5 lakh)
Claim HRA while living with parents
Employees’ Pension Scheme (EPS) of 1995 offers pension on retirement, disablement, pension to widow and pension for nominees. This article explains how much EPS Pension will you get along with the Pension Calculator if you retire at age of 58 years.
Overview of EPS or Employee Pension Scheme
The EPF pension or EPS is a pension scheme for the employees of organized sector .This pension scheme gives a guaranteed monthly pension after the retirement. Employee provident fund organisation(EPFO) manages the pension account of all those who are contributing to EPF including private trust. Our article Understanding Employee Pension Scheme or EPS explains EPS Pension in detail but an overview of the EPS Pension is given below.
- 8.33% of employer’s monthly contribution from the EPF goes into EPS. Monthly contribution to EPS is restricted to 8.33% of 6500 or Rs 541 p.m and from Sep 2014 Rs 1250 (8.33% of 15,000). Government’s contribution is of 1.16% of the worker’s monthly wages if salary less than Rs 6,500.
- Unlike the EPF contribution EPS part (8.33% out of 12% contribution from your employer or Rs 541 and after Oct 2014 Rs 1250 what ever is minimum) does NOT get any interest.
- Lifelong pension is available to the member and upon his death members of the family are entitled for the pension.
- Pension is called Superannuation pension if one gets pension on retiring on attaining the age of 58 years
- A employee can start receiving the pension under EPS only after rendering a minimum service of 10 years and attaining the age of 58/50 years.
- One can apply for EPS Pension from a date immediately following the date of completion of 58 years of age notwithstanding that the person has retired or
ceased to be in the employment before that date.
- Maximum Pension one can get is Rs 7,500 per month.
- Minimum Pension one can get is Rs 1,000 per month.
- Maximum service for the calculation of service is 35 years.
- The fraction of service for six months or more is treated as one year and the service less than six months shall be ignored. So 9 years and 6 months will be rounded upto 10 years.
- If no wage is earned for a certain period, that period is to be deducted from the service, as there will be no contribution to Pension Fund.
- If one resigns before completing 9 years and 6 months of service, you get the “withdrawal benefit” which depends on your monthly salary and the no. of years of service.
- No pension is payable before the age of 50 years.
- Early pension can be claimed after 50 years but before the age of 58 years. But it is subject to discounting factor @ 4% (w.e.f. 26.09.2008) for every year falling short of 58 years. In case of death / disablement, the above restrictions doesn’t apply.
- No pensioner can receive more than one EPF Pension. So if you have worked in multiple organizations you meed to consolidate all your EPS and then apply for EPS Pension. If you have multiple Scheme Certificate you need to submit all of those.
- EPS Pension is taxable and has to be considered under the head Income from Salaries.
Along with Employee Pension Scheme there is National Pension Scheme(NPS). Most of the new government employees are now the member of National Pension Scheme. However, most of the private employees are still with the EPF pension but can contribute to NPS. Our article Understanding National Pension Scheme – NPS explains it in detail.
How to apply for the EPS pension?
One needs to fill the Form 10D and get attested by bank manager with photo and other required documents. Submit the form to EPFO. Once you complete the service of 10 years, then you get the scheme certificate. This scheme certificate can be used to claim your pension either from 58/50 Yrs. Our article Forms to avoid TDS,15G, 15H, and EPF Withdrawal Forms Form 19, Form 20,Form 10C,Form 10D,Form 51F explains it in detail.
How much EPS Pension will you get?
Pension depends on your contribution to Pension Fund and your number of years of service. Way to calculate pension changed on 15 Nov 1995. Hence there are two ways in which pension can be calculated. Two different ways of calculating pension is explained below along with the EPS Pension Calculator.
Personal loans are quick and easy to avail of and the greatest advantage is that the product requires no collateral. Moreover, the documentation requirements are minimal with faster approval and disbursement. Compared to other kinds of loans, such as home loans, personal loans are more convenient. Most financial institutions provide this product in their offering; however, understanding when to avail of this option is crucial.
Personal loans are ideally not the most convenient financing option when it comes to fund consumption needs like purchasing a used car or a television. Choosing personal loans only for emergencies is recommended and that too only if you are assured of being able to repay it in a timely manner. The 5 situations when Personal Loans come useful are:
- Settle high-cost outstanding debt
Choosing to apply for a personal loan to pay a more expensive debt obligation is advisable. For example, some people borrow money from private lenders where the interest rates are exorbitant. In such cases availing a personal loan becomes a more cost efficient choice and reduces the total outflow. Moreover, this product is offered by financial institutions and servicing the loan in a timely manner can help you build a good credit history, which can be beneficial in the future.
From June 1, 2016, all employees or salaried taxpayers will have to submit Form 12BB to claim income tax deductions on leave travel allowance concession (LTA), house rent allowance (HRA) ,interest paid on home loans and Income tax . You will also need to submit proofs of your investments or expenditures. This article explains Form 12BB in detail.
Income Tax Proof Submission by Employee to Employer
Employers ask Salaried Employees to furnish a declaration to their employer for the Income Tax Deduction they are eligible under various provisions of Income Tax along with proofs under section 192 of Income Tax Act. Employers consider these declaration and proofs while calculating tax and TDS on Salary of their employees. Although employer has been taking declarations from employees there was no standard format for the same. But now CBDT has prescribed Form No.12BB for the purpose of estimating employee’s income or computing the tax deduction at source from 1 Jun 2016, through notification No. 30/2016.
What is process of Investment declaration, proof submission to Employer?
- The employers asks employees for declaration of the their proposed investments for tax exemptions/deductions from employees in the beginning of the financial year (April itself)
- Based on your declaration and the investments that qualify for deductions and exemptions, your employer deducts tax on your salary every month.
- By December or January employer asks for submission of the proofs for all proposed tax saving investments.
- The deductions are shown in Form 16, which is given by employer. Employer also gives Form 12BA for prequisites.
Our article Income Tax Proof Submission to the Employer explains proof submissions to claim deductions by Employees in detail.
Section 192 of Income Tax Act : TDS on Salary
If you could not submit ITR-V of years from AY 2009-2010 to AY 2014-15, you can E-VERIFY past income tax returns by 31st August 2016. These returns shall then be processed by the income tax department by 30 Nov 2016. Lets look at the information from Income Tax Office of how to E-Verify Past Income Tax Returns in detail.
Overview of Income Tax Return Process
Income Tax Return process consists of three steps
- Filing of Income Tax Return : First you have to fill your Income Tax Return or ITR for given year by deadline, usually 31 st July.
- Verifying your ITR You have to verify your ITR submitted. This could be by physically sending ITR-V or be Electronically verifying the ITR. If you forget to e-verify your ITR or fail to dispatch ITR-V to CPC Bangalore then it will be considered as if you have not filed your income tax return and the IT department will not process your ITR.
- E Verification facility was introduced by Income Tax Department in FY 2014-15 or AY 2015-16. Our article E-verification of Income Tax Returns and Generating EVC through Aadhaar, Net Banking explains the process in detail.
- If you have not verified your ITR electronically then you are supposed to send signed copy of ITR-V to CPC, Bangalore within 120 days of e-filing.ITR-V stands for Income Tax Return–Verification ITR-V is generated when you file your I-T return online—without using a digital signature.It is a one page document, pdf file. ITR-V is the acknowledgement form that you get after filing your ITR. It must be signed and sent to CPC, Bengaluru within 120 days of e-filing your ITR. The address to send via ordinary post or Speed Post is:
- Income Tax Department-CPC,Post Box No-1, Electronic City Post Office,Bangalore-560200, Karnataka
- Processing of ITR submitted. After the income tax return is processed another mail is sent to the assessee or person who has filed ITR, which is called Intimation under section (u/s) 143(1). The intimation under section 143(1) is sent by the IT Department in response to tax return filed by the tax payers. The intimation as the name suggests intimates the tax payer about, any tax and interest payable or if the assessee is eligible for refunds after providing all the necessary adjustments relating to tax deducted at source, advance tax paid, any tax paid on self – assessment or any other amount in the nature of tax or interest. Our article After e-filing ITR: ITR-V,Receipt Status,Intimation u/s 143(1) explains the step in detail.
E-Verify Past Income Tax Returns
Unfortunately, a large number of taxpayers, skipped Step 2 i.e Verifying ITR and therefore their return process is incomplete. Past returns could only be verified by sending the physical ITR-V to CPC, Bangalore. This process was rid with many problems, postal delays and misplaced envelopes etc. EVC or Electronic verification was introduced in Year 2015 for filing of returns from FY 2014-15.