January 07, 2016

HRA Salary TDS declarations

Tax Deduction on Source (TDS) on salary is a major deduction for most of salaried people. TDS can be higher if the exemptions such as House Rent Allowance is not considered by employer. Though there is different policies for different companies, one needs to understand what the law says about it. In this article we discuss the legal requirements for HRA exemption to be considered by employer.

 

 

Do I need to submit registered rent agreement to employer for my HRA exemption?


The straightforward answer is : If your employer says so, then Yes you need to.This answer is explained in brief as follows:


Most of employees are facing this issue. They come complaining about their employer that the employer is asking for Rent Agreement for considering HRA exemption (House Rent Allowance) . Frustration can be sensed in cases where the employer has refused to accept Notarized Rent agreement and has specifically asked for Registered Rent Agreement.

So the question they ask, "Do I need to submit rent agreement?"

Well, the answer to this question lies in the Income Tax Act, 1961. The TDS deduction on salary is guided by Section 192 of the Income Tax Act. This guiding section was amended in year 2015. With this amendment it is necessary for an employer to "obtain evidence or proof or particulars of prescribed claims". Meaning thereby, that the employer must look into whether the Rent Payment Claim made by the employee is genuine or not. Before 2015, there was no such express requirement. It was implied but not specific. Now there is clarity. But one clarification has led to another confusion. What are the documents prescribed by the Government. The answer is they have not prescribed any document.

Now there lies the scope for debate. The Act has not clarified the nature of documents. It is kept open for the best judgement of the employers. Further, the employers have been given powers to satisfy about the claim made by employee. What suffice as the proof may vary from employer to employer. 
In the circular issued by Government on this matter viz. CIRCULAR NO.20/2015 [F.NO.275/192/2015-IT(B)]DATED 2-12-2015, gives an example of rent receipt forms a proof for rent payment claim. But it also reiterates that the employer has power to ask for such document as they may feel necessary.

And therefore, if the employer asks for registered rent agreement, you need to submit registered rent agreement.

Having said that, the employee may file his return and claim for exemptions and deductions which the employer has not considered. So, if the employer has not allowed you HRA exemption because you didn't have a Registered Rent Agreement. Don't worry!! File your Income Tax Return and claim the benefit. For queries in this article mail us at info@capsandco.com