HRA Tax Concession

As per the ITAT ruling, the concerned tax official who is monitoring the tax concession filed by a salaried employee can ask for further proof, in case he or she feels that rent receipts are fake.

Documents

Some of the additional documents which can be asked by the concerned tax officer are:

• Licence and Leave agreement
• Housing co-operative society letter, about the tenant and the owner
• Electricity bill
• Water bill
• Stamp paper agreement between the tenant and the landlord

Deduction of TDS

In Union Budget 2017, the Finance Minister had proposed that those who are claiming a House Rent Allowance (HRA) of more than Rs 50,000 per month will have to deduct tax at source at the rate of five per cent. The TDS will have to be deducted on the last month of the year in which rent is paid or last month of tenancy.

Tax exemption under HRA

The tax exemption under HRA was sought under Section 10(13A) of the Income Tax Act, according to which employees can avail tax exemption on actual HRA received or 50% of the basic salary for an employee working in metro cities and 40% of basic salary for an employee working in the non-metro city.