Upgrad LLM

income tax benefits when emplyee owns a house

SUPERINTENDENT

I am a central Government Employee working as a Group B officer. Even though I am native of Hyderabad. I am posted to a district other than Hyderabad. I am drawing a basic salary of about 17000/- . HRA is drawn at the rate of 10 percent beacuse I am working in a class 'C' city. Hyderabad is a Metro where HRA is drawn at the rate of 30 percent. Because of working in class C city I am loosing HRA of 20 percent.  There is a house property situated  which is registered in my father's name. My father expired during 1998. Now I require to mortgage the property in bank to obtain loan for the purpose of my son's higher studies. In case if I  get the house transferred in my name, I have to show to my department the owner ship of the house. I am the legal heir of my father and my mother is willing to release her share in my favour. I am worried about the treatment of HRA for the purpose of Income tax. I am paying rent in the district where I am working as I have taken a house there on rent. However  I may rent out the present accomodation in Hyderabad and will stay in a rented house  I donot stay at my work place permanantly as I visit my native place frequently moreover after two years I will get transferred to Hyderabad. I want to know about the drawl of HRA whether it will be effected on account of my being owner of a house in Hyderabad while working away from my native and also when I get transferred to Hyderabad. Also I want to knwo about the treatment of HRA for the purpose of Income tax in both the situations. In case if I am loosing any benefit on account of my being the owner of the house then what is the proceedure to avoid the loss and what are the techniques I should adopt.

 
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Advocate

Siraj

You can claim HRA even though the house is in your name since, the place where you work and the place where the house is situate is different and as such for purpose of work you cannot shuttle between the place of work and the residence daily, hence you can still claim HRA and show the house as self occupied by your family.

 
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practicing advocate

I agree with Vishal.

 
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Adv P & H High Court Chandigarh

Neither you are going to lose your HRA on today or in future after 2 years when you shall be transferred in your native place. Govt. is paying this amount aggregate at the percentage you described. So far income tax is concerned, no separate computation shall be made except as usually done at present.

 
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Chartered accountant

HRA is linked to your place of performing duties as employee and your ownership of a house in another place does not make any difference. You are also entitled to get exemption u/s 10(13A) read with rule in this regard. You have no problem with Income tax as such.

siva208@yahoo.com

 
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Director

Your ownership of house does not affect in any way the taxation of HRA in your hand.

Since you will have only one residential house in your name which has not been rented out, the same is treated as self occupied property  and therefore the income from same is NIL for Income Tax purposes.

The taxation of HRA is governrd as per Income Tax Rules and the minimum of following is exempted:

1. Actutal HRA received

2. 40% of Basic + DA

3. Actual rent paid - 10% of (Basic + DA)

 
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