Psdhingra
Legal Analyst, Hrm
RAMAKANT R
Primus Techsystem
Pramodthakar
Taxation And Hr
Nathrao
Insolvency N Gst Professional
Pon1965
Construction

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For claiming HRA, is the rent paid to be considered on accrual basis or cash basis? In other words, should we consider rent receipts date or for which period the rent applies. For example for the FY April 1, 2014 to March 31, 2015 - if the employee pays rent in the following month (March rent paid on April 5), then should we take:
(1) rent receipts for the occupancy period March 2014 to Feb 2015, which will have receipts dated between April 2014 to March 2015? OR
(2) rent receipt for the occupancy period April 2014 to March 2015, which will have receipts dated between May 2014 to April 2015?
Thanks for your advice.

Period of stay only to be considered not the payment date. Pon
This is a good question.
Even I tried to get the details of the documents to be obtained by the employer while giving the relief for House Rent Paid.
There are no specific guidelines about the documents i.e. rent/tenancy agreement rent receipts or what so. Now a days the rent payment is made online and for which usually the actual rent receipts are not obtained by the tenant. If anyone can tell that what are the provisions of IT act for this relief.
Ramakant

At least 3 rent receipts for the whole year are required to be produced. Pon
based on experience. I do this way for the past many years. Pon
Please note Salary working under Income tax act should be on Accrual basis. Hence Rent should be also on accrual basis. Some time it may happen actual payment of rent does not made in particular year. For that if registered lease agreement is there and according to that agreement you can claim the rebate. But it is very important that under the Head of Income from Salary, salary receipt and allowable rebate thereof must be on Accrual basis / mercantile accounting system and not Mix system.
Thanks for your response pramodthakar. Even though salary is on accrual basis for IT Act, deduction available under Section 80C for Children Tuition fees is on cash basis (payment basis) according to the article "Deduction u/s. 80C for tuition / school / education fees" . So in that case, there is a mixture of cash basis even though salary is on accrual basis. That's why I was wondering about the rent, and there does not seems to be any clarity in the wording of the Act itself.

In many cases there is no lease agreement document (registered agreement is even more rare) between the employee and his landlord and we accept the rent receipts as proof. The Act again does not specify that an Agreement is required. If we take the rent receipts based on accrual basis, then we will not be able to collect the receipt for March rent until April of the following financial year.

I understand your explanation, but am trying to see if there is any clarity given anywhere explicitly stating that it is on accrual basis for claiming rent.

Thanks!

Mr. Anonymous,
If you know the definition and implication of assessment year/ previous year, you can apply your own mind also about what should be the period for the purpose of calculation of gross income, exemptions, rebates and taxable income, whether on accrual or actual basis.

Dear Mr. Dhingra,
Thank you for your response. Maybe your response is intended to guide me towards the answer, but I am unable to find the definitive answer.
For tuition fee, life insurance premium payment, medical insurance premium payment etc., we allow the deduction on actual (cash) basis i.e. based on date of payment. So my guess would be that it is the same for rent payment also. On the other hand in some scenarios it does not seem to make sense - for example if an employee joined our company on April 1, and receives HRA as part of April salary, would rent paid in April for the month of March (before he even joined our company) be eligible for deduction just because it was paid in April?
Hence I am seeking clarification on the same.

Since there is no satisfactory answer to this question from last year, I would like to repeat the question and see if anyone can provide clarity on this.
For claiming HRA, is the rent paid to be considered on accrual basis or cash basis? In other words, should we consider rent receipts date or for which period the rent applies. For example for the FY April 1, 2015 to March 31, 2016 - if the employee pays rent in the following month (March rent paid on April 5th), then should we take:
(1) rent receipts for the occupancy period March 2015 to Feb 2016, which will have receipts dated between April 2015 to March 2016? OR
(2) rent receipt for the occupancy period April 2015 to March 2016, which will have receipts dated between May 2015 to April 2016?
Thanks for your advice.


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