Strict new norm for claiming HRA

Strict Rule for claiming HRA Exemption

A few days back, the income tax department has tightened the norms for claiming tax exemption for house rent allowance (HRA). HRA is the payment given by an employer to an employee for to meet the requirement of house rent.

Now, it has become mandatory to submit the PAN (Permanent Account Number) of the landlord to the employer if annual rent paid by employee more than Rs. 1 Lakh per annum. The central government has lowered the exemption limit for reporting the rent. Earlier, taxpayer had to report the PAN of the landlord, if the monthly rent more than Ra 15,000 or Rs 1.8 lakh per annum.

If the landlord does not have a PAN, the assessee has to submit a declaration to this effect along with name and address of the landlord. Even if an employee pays rent below Rs 8,333 per month, he/she has to produce the rent receipts availing the rent receipts availing deduction under HRA. However, for thos emplyee who are drawing HRA up to Rs 3,000 per month will now be exempted from producing rent receipt. The new norm has come into effect from the financial year 2013-14 or Assessment Year 2014-15.

The new rule is aimed at people claiming HRA exemption for living in their own house and claim HRA exemption. HRA granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. 

For more detail and any other query related investment, you can contact me through my email

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Common mistake during tax planning

Common Mistakes during Tax Planning

All of us want to save tax more and more or in fact no one want to pay tax happily. Most of us don’t plan in the beginning of financial year. We awake for it when our office accountant remind us or our CA. The main reason behind wrong tax planning is to wait last moment of financial year (Feb-March) closing. In the hurry of tax planning in last moment we often ignore the essential element of financial planning like our financial goal, risk appetite, income and investment product.

If you have ever felt that during Jan to March we will get so many telephone calls from insurance company for ULIP (Unit Linked insurance Plan). ULIPs are insurance cum investment product and have many charges which are not mostly disclosed by an agent. In fact you should not mix your insurance with investment, one of the golden rules of financial planning. In these products, you don’t get adequate risk cover so your insurance planning spoil and you get raw deal in the hurry of tax saving.

We often do not optimize all tax saving options. Many of us only stuck with Section 80(C). There are also so many other options exist which you should explore with the tax expert. There are many other relaxation of tax like medical treatment of dependant handicapped, loan for higher study, suffering from specified diseases and many more.

If your age, income and risk appetite allow you to some degree risk you must invest in ELSS mutual fund. These funds come with 3 year lock in period and worth for invest. It is the good option for tax saving. If we keep in mind the mentioned things in this article, we can make optimal financial planning.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com