Tax Talk

I have just joined a new company and I want tax benefits for paying rent. I live with a friend who already has a rent agreement in his name. Can I apply for a new rent agreement? Can one room with the same address have two rent agreements?

- Ganesh Parte

According to the Income-tax law, House Rent Allowance (HRA) paid to an assessee by his employer to meet expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee, shall be exempt up to the prescribed limits. The following conditions should be satisfied for claiming this exemption:

(a) Assessee is not the owner of the residential accommodation occupied by him; and

(b) Rent is actually paid by the assessee.

You can claim HRA exemption provided the above twin conditions are satisfied. There should be clear documentation with the landlord in the form an agreement. Hence, you should apply for a separate rent agreement in respect of the portion let out to you.

Please note that you will be required to submit the copy of the rent agreement and the rent receipts with your employer and he/she will be in a position to allow the exemption while calculating tax deducted at source on your salary income.

There is a residential plot in Haryana which my sister-in-law (brother's wife) and I jointly own.

Now, she wishes to gift her share in the plot to me. If she does so, would there be any tax liability on either of us?

- Sunil

According to the tax laws, any immovable property (including a plot of land) received from a relative as gift is exempt from tax in the hands of the receiver of the gift. The term relative includes sister-in-law. Hence, the plot gifted to you by your sister-in-law shall be tax exempt in your hands.

It is recommended that you have adequate documentation to support the gift so made and also this gift deed may be subject to stamp duty which varies from state to state. These documents would also help you in registration requirements with the registrar as you would be the sole owner of the said plot.

Further, gift is not regarded as a transfer as per the tax provisions and hence no capital gains shall be chargeable to tax in the hands of the transferor i.e. your sister-in law.

(The author is a practising chartered accountant)

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