Chintan Singh (Manager) 22 November 2012

Company lease agreement

Hello

I am working with a bank that provides its employees leased accomodation, in which rent is paid by the comapny, as well as HRA based salary strurcture. The salary in leased accomodation is substantially greater thean normal HRA based salary structure.

I am planning to move to rented house with a couple of my friends working for different organizations. We wish to undertake a joint agreement, wherein my bank pays my share of leased rent and my frineds enter the contract under individual lease.

Hence I want my bank, and my two friends to enter into an agreement with the owner of the property. My bank has shown reservation in undertaking such a leased contract, saying it is hard to take liablity of people other than bank employee's family.

Is there any possibility that such a structure could be still worked out?

Thanks

Chintan

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3 Replies

Goutam Prasad (Advocate) 22 November 2012

Dear Mr. Singh,

In this matter, I have to inform you that the structure of salary in leasehold accomodation may attract you in terms of figures, but actual amount in hand will be less, it is because of lease rent portion, which is not paid you in hand instead it goes to house owner directly. Also for income tax purpose, the same is added in salary as RFA and ultimately, your IT liability becomes more.

I will advise you to get rent agreement executed in your name with your friends and pay rent of your own. In this case you will get HRA in cash and some portion of HRA will be exempt under section 10 of IT Act, thereby reducing your tax liability.

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Chintan Singh (Manager) 22 November 2012

Dear Goutam The difference in salary is substantial. In the leased accomodation, the cash componenet paid by bank is more than HRA component and in leased accomodation, we get a cash component of under CLA. Further, the initial deposit amount and brokerage is also paid by the bank. Thus I am looking for a contract leased accomodation from my bank with my friends signing the contract in individual capacity. Please advice if this is possible. Thanks Chintan

Chetan Joshi (Advisory/Advocacy) 22 November 2012

Chintan.... why would a bank get into a new lease agreement altogether....That too with a party who is not even distantly related....A banking company will not do such act.....

Drop the idea....BTW where is the calculation mismatch, is the value of perquisite taxable as rent free accomodation more than the HRA?

Regards

Chetan(dot)7679(at)gmail(dot)com