I am Government employee getting house rent Rs. 13384 per month in my salary. I am leaving in rented accommodation, paying rent Rs. 12000 per month. Recently, I booked a flat. Builder assured possession by December 2019. When i booked this flat developer has given me a scheme to pay my house rent @ Rs 14250 PM till possession of flat. I want to know, is there any benefit available in Income Tax on the amount I received as house rent from my builder? If so, then under what section of Income Tax Act.
Hi,
- It is better to pay rent from your account and take amount from builder. In this way,you can take the benefit of HRA component in your salary and pay tax on amount received from builder otherwise you will be liable to pay tax on amount paid by builder without the benefit of HRA.
Thanks
Dear Sir,
Hope you are doing well !
It is advisable that for HRA exemption, pay rent in your account only. Otherwise it will be treated as your income.
Take the amount from builder as a compensation.In case the compensation received has been utilised towards payment of rent, the amount received is not taxable.
Thanks & Regards,
Payal Chhajed
Hi
Such amount paid by the builder is taxable.
However, since you are staying in a rented accommodation, only the receipt exceeding the rent paid shall be taxable I.e. 2250 per month.
Also, if such claim is made, HRA Exemption shall be denied. You can either claim the HRA exemption or the deduction as stated above.
Hi,
Excess amount received from builder will be treated as your income.
Also, you will not be able to claim HRA exemption.
You are already getting HRA from your job so use it to pay rent and take HRA benefit and show the amount received from builder as other sources income. Anyways your HRA is more than your rent expense.
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Thank you
More facts are - Scenario 1 - 10% of my basic pay+DA will be Rs. 1,20,000 in the year 2018-19. If I claim deduction of HRA received with my salary, it will be Rs. 24000 only. All amount received from builder i.e. Rs 14250x12=171000 will be taxable. Scenario 2 - I will include full amount of HRA received from my salary, in taxable income. (i.e. Rs 13384x12) and Rs. (2250x12=27000) in taxable income as rent received from builder. Please confirm whether both the scenario explained above are correct as per Income Tax Act.
Yes it is correct.
Dear Sir,
Yes, your understanding is absolutely correct.
Thanks & Regards,
Payal Chhajed
Hi,
Yes, it is correct.
Yes, these scenarios mentioned above are workable.
Can you ask builder to pay rent directly to your landlord and only net amount to be paid to/ received from builder.
Hi,
You can take the HRA benefit for the rent paid by you. For the rent received from the builder, you need to pay taxes on the same.
Regards,
Nikhil
Both the options mentioned above are doable. Wherever your taxes are minimised, you can go in for that working.
Since your rent is less than both HRA amount as well as amount from builder I don't think there should be any problem in choosing one of them. Because if you deduct rent from one amount you will pay tax on second and vice versa and so I think it's better to use HRA to pay rent and keep it simple.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you.
Yes, the above understanding is correct. You may choose the option whereby less taxes are applicable.
Hi
Excess amount received from builder will be taxed in your hands,further HRA exemption will not be available.
yes ,your understanding is correct in above scenarios.
