Taxexcel

Saturday, 18 September 2021

Can anyone claim a rent allowance if he/she live in my parents' home? Salary earners

living in a rented house are entitled to tax exemption under House Rent Allowance

(HRA) under Section 10 (13A) of the Income Tax Act, 1961. This discount while

staying at your father's house?

Provisions under the Income Tax Act relating to HRA Under income tax law, if a person is of the majority age, i.e. 18 years or more, and is not dependent on his or her parents, he or she is considered a separate taxpayer in the eyes of the law. The calculation of income varies from income to income and therefore, the amount of HRA will also vary.

You may also, like- Automated Income Tax House Rent Exemption Calculator U/s 10(13A)

If you live in your parents' home, you will need to meet the HRA tax exemptions

1. The house should be in the name of the parents

The salaried person has to be shown as a tenant in the parents' house. Since the owner of the house has to pay the rent, the parents have to own it. The house may be in the name of one or both parents.

2. Rent payments should be sent directly to a bank account or checked in the name of the guardian

In order to claim HRA exemption in this way, salaried employees must have strong evidence that the parents actually paid the rent. In this case, the money transferred by bank transfer or check plays an important role.

3. You need to make a rental agreement with your parents

In order to claim HRA while living in a parent's home, the salaried person must enter into a rental agreement with his or her parent, who owns the home,

4. Rental income will be included in your parents' total income

The rent paid to the parents is taxable for them under the heading ‘Income from home property.’

You may also, like- Automated Income Tax Preparation Excel Based Software All in One for the Non-Govt employees for the F.Y.2021-22 as per new and old tax regime U/s 115 BAC [This Excel Utility can prepare at a time your Tax Computed Sheet + Individual Salary Structure as per the all Non-Govt Employees + Automated H.R.A. Exemption Calculation U/s 10(13A) + Automated Form 12 BA + Automated Income Tax Form 16 Part A&B and Form 16 Part B for F.Y.2021-22]

If the parents are in less tax than the salaried person claiming HRA exemption, then the family can save tax completely. If they are over 60 years of age, they will also enjoy a higher minimum income exemption limit (Rs 3 lakh for those over 60 years and Rs 5 lakh for those over 80 years). If they have no taxable income, you will be able to save significant taxes as a family.

How much tax can be saved on house rent?

The amount of HRA that can be claimed as a discount is the lowest of the following:

H Received actual HRA /

Bas 50% for Basic Metro City (Basic Salary + Expensive Allowance)

Paying rent (-) 10% of salary

Documents required claiming a house rent allowance

Rent receipt, if the rent is more than 3000 / month.

The landlord's pan, if the rent exceeds 1 lakh/year.

Important information:

• HRA discounts are available only to salaried persons.

The HRA cannot be claimed if the husband/wife has a home in their name as the husband and wife live together under the Income Tax Act.

Tax HRA is not available under the new tax system

H You can claim discounts on both HRA and home loans. 1.5 lakh as against the original payment and if you are in another city due to a job posting, you will have to pay interest of Rs. 2 lakh.

Even if HRA is not part of your salary, you can claim HRA deduction under section 80GG. This section applies to those who do not receive HRA as part of their salary and self-employed persons

Download Automated Income Tax Salary Arrears Relief Calculator U/s 89(1) with Form 10 E from the F.Y.2000-01 to F.Y.2021-22 [This Excel Utility most handy and easy to generate]

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Thursday, 16 September 2021

What is income tax relief under section 89(1) of the Income Tax Act, 1961?

For the purpose of income tax law, income tax is levied on the total income earned or received by the assessee in the previous year. There are some cases where the past due employee is paid as salary arrears in the current year.

Income Tax Salary Arrears Relief U/s 89(1)

In this case, the income tax paid by the employee will, in this case, be higher than the current year. This may be due to a change in the slab rate applicable to the assessor which will cause their slab rate to change to a higher tax slab.

Tax relief under section 89 enables us to deal with such situations. It provides relief in cases where the employee is in a high tax bracket at the time of receipt of the previous year's payment.

How to calculate tax relief under section 89 (1) regarding salary arrears?

Detailed steps for calculating relief under Article 89 is given below:

Step 1: First calculate the tax payable on the total income including the arrears of the year in which it is received.

Tax calculate as payable on total income excluding arrears amount in the year of receipt. As evidence, the employer provides the employee with outstanding documents that will specify the additional amount received.

This amount needs to be deducted from the total salary mentioned in Form 16 of the employee. If there were no arrears, the tax account would give us liability in one case.

Step 3: Calculate the difference between step 1 and step 2 This will be taxed on the additional salary included in the total income.

Step 4: Calculate the tax payable for each previous year with additional arrears:

On total income including additional arrears

On total income excluding additional arrears

Step 5: Calculate the difference between the amount calculated in step 4 This will calculate the actual tax liability of the previous year for receipt of arrears in the current year.

Step:: The additional amount of step at over on step over will be the amount of tax relief allowed under section under no. No need to.

Examples of how income tax relief can be calculated.

Now make out the above points with the help of an example. Suppose Anima got it

Previous Year	Taxable Salary
2011-12	7,00,000
2012-13	8,00,000
2013-14	9,00,000

In view of the above information, we will now try to estimate the tax payable for relief and assessment year 2021-22 under section 89 that Anima's salary in the previous year of 2020-21 was Rs. 12,00,000.

Previous Year	Amount received
2011-12	1,00,000
2012-13	1,50,000
2013-14	1,50,000

Computation of Tax Payable For the Assessment Year 2021-22

Particulars	Inclusive of salary arrears	Exclusive of salary arrears
The current salary of Amit	12,00,000	12,00,000
Add: Arrears of Salary	4,00,000	nil
Taxable Salary	16,00,000	12,00,000
Income tax on the above	3,04,200	1,79,400
Health & education cess @4%	12,168	7,176
Total tax payable	3,16,368	1,86,576

Computation of Tax Payable For The Previous Assessment Years:

Computation for the Assessment Year 2011-12

Particulars	Inclusive of salary arrears	Exclusive of salary arrears
The current salary of Amit	7,00,000	7,00,000
Add: Arrears of Salary	1,00,000	nil
Taxable Salary	8,00,000	7,00,000
Income tax on the above	94,000	74,000
Education Cess & SHEC @3%	2,820	2,220
Total tax payable	96,820	76,220

How to claim relief under Income Tax Act, 1961?

The tax flow of arrears of income is recalculated according to the tax slab applicable for both years. This means that the tax flow will be calculated for the year of receipt and the year related to the income.

To claim relief under Section 89, the Income Tax Department has made it mandatory to file Form 10E. In a case where the employee has claimed relief under section 89 but has not submitted Form 10E, the claim will not be granted and the employee will be informed accordingly.

Calculation of Income Tax Relief Under Section 89: