Claiming HRA? You need to check your AIS

Last Updated On: Jan. 5, 2022, 9:52 p.m.
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CLAIMING HRA? YOU NEED TO CHECK YOUR AIS

What is AIS?

Annual Information Statement (AIS) is a utility/ form available on Income Tax Portal which displays all the financial and tax related information available with the Tax Department with regard to the taxpayer. It is an extension of an earlier available form, called 26AS, on the portal which contained the information only upon taxes deducted and deposited during the year along with the summary of Specified Financial Transactions (SFT). Now, AIS has brought in added features to the old form 26AS by showcasing information upon bank interest earned, dividend income and sale of securities, in addition to tax related information.

 

The Government has enlarged the scope of Form 26AS to cover information regarding various transactions made by a person during the year. The CBDT has omitted Rule 31AB, and a new Rule 114-I has been inserted to provide that the authorities will upload the Annual Information Statement (AIS) in Form No. 26AS in the registered account of the assessee. Such form shall consist of the following information:

  • Information relating to TDS and TCS
  • Information relating to pending proceedings
  • Information relating to completed proceedings 
  • Information relating to Specified Financial Transactions (SFT
  • Information relating to the payment of taxes
  • Information relating to demand and refund

Information received from any officer, authority, or body performing any functions under any law or information received under an agreement referred under section 90 or section 90A or information received from any other person to the extent it may be deemed fit in the interest of the revenue.

 

What is HRA How is Tax Exemption from HRA Calculated?

HRA is the house rent allowance in income tax. It means the salary component received towards the rent payment and is allowed as a deduction from taxable salary under Section 10(13A).

The deduction available is the least of the following amounts:

  • Actual HRA received
  • 50% of [basic salary + DA] for those living in metro cities
  • 40% of [basic salary + DA] for those living in non-metros
  • Actual rent paid should be less than 10% of basic salary + DA

 

You might have a question if you are living with your parents how to claim HRA?

A person can pay rent to his/ her parents and claim the House rent allowance provided. He/ she has to enter into a rental agreement with the parents and transfer money to them every month. This way, the assessee can save on taxes. Also, the assessee’s parents need to report the rent received as income in their income tax returns. If their other income is below the basic exemption limit or taxable at a lower tax slab, they can save tax on the family income.

 

AIS information – Rent received-

The broad categories of information covered in AIS is divided into 50 categories. One such category is ‘Rent received’. Notably, the information under the category of ‘Rent received’ will be figure-out on the basis of the following three sources-

1. Form 26Q filed by the deductor-

Specified tenant is liable to deduct TDS as per provisions of section 194-I of the Income Tax Act. Accordingly, such tenants are also required to file TDS statement/ return in Form 26Q on quarterly basis.

Information so furnished in Form 26Q will be taken up as the source by AIS.

2. Form 26QC filed by the deductor-

Tenants (i.e., individual or HUF) paying rent amount more than INR 50,000 is liable to deduct TDS as per provisions of section 194-IB. Such tenants are required to furnish challan-cum-statement in Form 26QC. Information furnished by the tenants under via Form 26QC will also be taken up as the source by AIS.

3. Annexure II of TDS statement in Form 24Q filed by the employer-

In order to claim the HRA, exemption available under section 10(13A), the employee is required to provide the PAN of the property owner. Correspondingly, the employer is required to report the PAN of the property owner (as provided by the employee) in the Annexure II of the TDS statement in Form 24Q.

 

Let us understand this with a basic example:

Mr Z, employed in Mumbai, has taken up an accommodation on rent from Mr. X for which he pays Rs. 15,000 per month during the Financial Year (FY) 2020-21. He receives a basic salary of Rs. 25,000 monthly and DA of Rs 2,000, which forms a part of the salary. He also gets an HRA of Rs 1 lakh from his employer during the year.

HRA received – Rs. 1 lakh

50% of basic salary and DA – Rs. 1,62,000 (50%*(Rs. 20,000+Rs. 1,000)*12 months)

Rent paid minus 10% of salary- Rs. 1,47,600

In the above case Mr. Z will claim HRA exemption of Rs. 1,00,000 which will get reflected in Annual Information Statement of Mr. X, but Mr. X has to disclose total rent received Rs. 1,80,000 (Rs. 15,000*12)

 

In such above mentioned case, if the information is reflecting in AIS and the assesee fails to file the return then she shall be considered as asessee in default.

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