Wednesday, November 16, 2011

PAN of Landlord mandatory for exemption of HRA - If rent exceeds Rs.180000 PA

Greetings of the day!

This is to bring to your notice a very important amendment made in Law by way of Annual Circular on Salaries. In the cases where annual rent paid by the employee is more than 180,000 (i.e. 15,000 per month) HRA exemption will be available only if PAN of the Landlord is provided. The relevant extracts are reproduced below

Further if annual rent paid by the employee exceeds Rs 1,80,000 per annum, it is mandatory for the employee to report PAN of the landlord to the employer. In case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee.

For detailed Circular please refer the attached file. For specific reference you may refer 5.2 Incomes not included under the Head "Salaries"(Exemptions) Point 9 Page 24

Thus to summarise:-

Obtain landlords PAN if rent exceeds Rs. 15,000/- per month

1.Employees who are paying rent of more than Rs. 15,000/- per month (more than Rs. 180,000/- per year) and claiming HRA benefit and are compulsorily required to furnish the Permanent account number (PAN) of the landlord to its employer in order to claim the HRA benefit.

2.In case the landlord does not hold a PAN, then in such a situation, a declaration is to be obtained from the Landlord confirming that he does not hold a PAN. Such declaration must be signed by the landlord with complete name and address and identifying himself by mentioning his valid ID number (like DL, Adhar, pass port, etc.). Copy of declaration format attached.

3.In case any of the above documents are not provided by the employee to his employer, HRA benefit cannot be provided.
 Actions required

1.The employees should be informed about this requirement and advised to obtain the PAN of the landlord immediately. If the PAN of the landlord is not furnished by the employees before the furnishing of the dates of actual proofs (before January 2012 payroll run ), then in such a situation the HRA benefit shall be withdrawn and the additional tax liab ility for year 2011-23 may be recovered over Jan-Mar 2012 period.

Watch-outs

1.There are no alternatives or options provided in the circular if PAN / declaration is not available. Thus if the PAN / declaration signed by the landlord is not available, then in such a situation HRA benefit cannot be given to the employee from the ongoing year i.e. 2011-12 onwards

Download the circular from www.bbspl.com/download/webpay/CirNo5Section192.pdf

Download the Employee Declaration Form from www.bbspl.com/download/webpay/DECLARATIONREGARDINGPERMANENTACCOUNTNUMBER.doc

Regards

Vikas Sapra
BBSPL

P.S.: Credits for the above information: Mr. Kamal Tejwani, practising C.A. in Delhi.
Webpay, An HRMS and Payroll Solution
http://www.bbspl.com
http://webpayhelp.blogspot.com

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