SECTION 10(13A)
House rent allowance
Salary includes dearness pay - For
the purposes of calculating the house rent allowance that would be exempt under
rule 2A, the term ‘salary’ includes ‘dearness pay’ also—Circular : No. 90 [F.
No. 275/79/72-ITJ],
dated 26-6-1972.
Expenditure must have been actually incurred - It
is necessary for granting the exemption under section 10(13A) that the employee
should have actually incurred the expenditure on rent. For purposes of
deduction of tax, therefore, the disbursing officer should ensure that the
employee concerned has in fact incurred the expenditure on rent. The payment of
rent should be verified through rent receipts in the cases of all employees—Letter :
F. No. 12/19/64-IT(A-I), dated 2-1-1967.
click here to download the IT Dept Circular for HRA Receipt exemption for Rs.3000
click here to download the IT Dept Circular for HRA Receipt exemption for Rs.3000
Living in own house or in any house
rent-free - House rent allowance paid to a person, who is living in
his own house or in a house for which he does not actually pay any rent, is not
exempt from tax in any circumstances—Letter : F. No. 12/19/64-IT(A-I),
dated 2-1-1967.
Production of rent receipts - Only
the expenditure actually incurred on payment of rent in respect of residential
accommodation occupied by the assessee subject to the limits laid down in rule
2A, qualifies for exemption from income-tax. Thus, house rent allowance granted
to an employee who is residing in a house/flat owned by him is not exempt from
income-tax. The disbursing authorities should satisfy themselves in this regard
by insisting on production of evidence of actual payment of rent before
excluding the house rent allowance or any portion thereof from the total income
of the employee. Though incurring actual expenditure on payment of rent is a
pre-requisite for claiming deduction under section 10(13A), it has been decided
as an administrative measure that salaried employees drawing house rent
allowance upto Rs. 3,000 per month will be exempted from production of rent
receipt. It may, however, be noted that this concession is only for the purpose
of tax deduction at source, and, in the regular assessment of the employee, the
Assessing Officer will be free to make such enquiry as he deems fit for the
purpose of satisfying himself that the employee has incurred actual expenditure
on payment of rent -Circular : No. 9/2003, dated 18-11-2003/[Para 5.2-(9)].
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