HRA Exemption

TAXATION: HRA Exemption of over Rs.8,333 a month will need landlord's PAN

In an attempt to further tighten its grip around tax evaders, the Income Tax department now wants tenants to produce their landlord's PAN for HRA exemption of Rs. 1 lakh or more annually or Rs. 8,333 monthly.  This is a new circular issued by CBDT.

Earlier, IT department asked taxpayers to produce a rent agreement or PAN card of the landlord if the monthly rent exceeded Rs. 15,000 or Rs. 1.80 lakh annually.

The CBDT circular says that if a tenant is not able to produce his/her landlord's PAN he/she must submit a declaration to this effect from the landlord along with the name and address of the landlord at the time of claiming HRA exemption.

IT Department has raised a big cause for salaried taxpayers through this notice.  The measure is aimed at salaried professionals who submit counterfeit tax receipts to evade tax payment.  Not all landlords are open to producing their PANs or even going through formalities of rent agreement or receipts.

Rebate Under Section 87A

Rebate:

Section 87A  has been inserted in the Income tax Act, 1961, and section 87 of the said Act has also been consequentially amended.

This amendment takes effect from 1st April, 2014 and will, accordingly, apply in relation to Assessment Year 2014-2015 and subsequent assessment years.

Rebate of Rs.2000/- for Individuals having total income up to Rs.5 lakh

With a view to provide tax relief to the individual tax payers who are in lower income bracket, a tax rebate has been provided to an assessee, being an individual resident in India and having total income not exceeding five lakh rupees.

The rebate shall be equal to amount of income tax payable on the total income for any assessment year or an amount of two thousand rupees, whichever is less. Consequently any individual having income up to Rs.2,20,000 will not be required to pay any tax and every individual having total income above Rs.2,20,000/- but not exceeding Rs. 5,00,000/- shall get a tax rebate of Rs. 2000/-.

Keyman Insurance Policy section 10 (10D)

Keyman Insurance Policy: Section 10(10D) amendments take effect from 1st April, 2014 and accordingly, apply in relation to Assessment Year 2014-15 and subsequent assessment years.

The provisions of clause (10D) of section 10 of the Income-tax Act, 1961 before amendment by the Act, inter alia, exempt any sum received under a life insurance policy other than a keyman insurance policy.

Explanation 1 to the said clause (10D) defines a keyman insurance policy to mean a life insurance policy taken by a person on the life of another person who is or was the employee of the first-mentioned person or is or was connected in any manner whatsoever with the business of the first-mentioned person.

It has been noticed that the polices taken as keyman insurance policy are being assigned to the keyman before its maturity.  The keyman pays the remaining premium on the policy and claims the entire sum received under such policy as exempt on the ground that the policy is no longer a keyman insurance policy.

The exemption under section 10(10D) is claimed for polices which were originally keyman insurance policies but during the term these were assigned to some other person.  The courts have also noticed this loophole in law.

With a view to plug the loophole and check such practices to avoid payment of taxes, the provisions of clause (10D) of section 10 of the income tax Act, 1961 have been amended to provide that a keyman insurance policy which has been assigned to any person during its term, with or without consideration, shall continue to be treated as a keyman insurance policy and consequently would not be eligible for any exemption under section 10(10D) of the Income tax Act.

PAN Allotment only after verifying original documents

PAN: Allotment 

The procedure for PAN allotment process will undergo a change with effect from Feb 3, 2014, The finance ministry said.

Applicants for PAN will have to produce original documents of proof of identity, address and date of birth for verification at the time of applying.

Copies of proof of identity, address and date of birth attached with PAN application forms will be checked against their original documents when applications are submitted at PAN facilitation centers.  The original documents would be returned to applicants immediately after verification.

An applicant can obtain a PAN card by paying a fee of Rs.85, plus service tax, in cash at the facilitation center.  

PAN is a 10- digit alphanumeric number issued in the form of a laminated card by the Income Tax department to any person or entity applying for it or to whom the department has allotted a number without an application.