Must Knows

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Now salaried class taxpayers cannot claim house rent allowance or HRA exemption on the basis of fake rent receipts in name of their mother, father, wife or any other close relative. The Income Tax Department may disallow fake HRA exemptions on basis of guidelines recently issued by the Mumbai ITAT (Income Tax Appellate Tribunal). Now onwards, such taxpayers may have to keep other documents to substantiate payment of rent to claim HRA exemption.

HRA exemption

Many salaried class taxpayers claim exemption of house rent allowance (HRA) by furnishing fake rent receipts – in the name of their mother, father, wife or any other close relative – to their employer. Till now, there was no guidance available with the Income Tax Department to deal with such cases and taxpayers firmly believed that only rent receipt was sufficient proof to show genuineness of rental payments. Taxpayers make such sham transactions with the sole intention of claiming HRA exemption in order to reduce tax liability.

 Problems taxpayers can face

Now, salaried class taxpayers which were claiming HRA exemption on the basis of fake rent receipts may find it difficult to claim the exemption. Recently, the Mumbai ITAT issued guidelines for income tax officials to deal with such cases.

In a case, a woman working as senior finance and accounts executive had claimed an HRA exemption of Rs. 7,31,640 for Assessment Years 2009-10 to 2011-12. She also owned a 2 BHK house, jointly owned by her with her husband.

She was showing payment of rent to her mother for residential purposes. She did not produce any evidence except rent receipts to substantiate that there was actual hiring of premises. Her claim was disallowed by the Assessing Officer and the CIT(A).

On further appeal, the Mumbai tribunal disallowed her claim of HRA exemption on the ground that there were no evidences available to substantiate hiring of premises except the rent receipt. The taxpayer could not produce any evidence to substantiate rental payments such as leave and license agreement, letter to society intimating about tenancy, payment through bank, electricity bill and water bill payments etc. It also said “the taxpayer was staying in her own flat with her husband which is emanating from ration card, bank statement and return of income. The mother of assessee also did not file any income-tax return since last six assessment years and said rental income was not brought to tax in the hands of mother of assesse.”

Procedure to follow

You should have evidence of your actual stay at residential house of your mother, father, wife etc. (viz. close relative). You can enter into a rent agreement for this purpose. You may also keep a copy of any other correspondence through email wherein there is consent of your relative to let out the house in your favour.

It is difficult to substantiate rental payments made in cash. So, it’s better to pay house rent to your close relative through transfer of money in his or her bank account.

If you are making rental payments which will be taxable in the hands of your close relative, make sure that he or she files income tax return (ITR) and shows such rental receipts in that return of income.

Married women cannot claim HRA exemption by showing rental payments to their mother when actually living with husband and daughter in another house.

It may happen that the addresses mentioned in your ration card, bank statement and return of income do not match with the recorded address of your rented premises. In that case, you will be in trouble as now the Income Tax Department may scrutinize such cases. Such a probe may indicate that you are living in another house in the same city as you rented premises.

You cannot claim HRA exemption if you have own house in the same city wherein your rented house is situated. It is difficult to prove the necessity of new rental house when you already have one house at your disposal.

You can claim HRA exemption if your rented house is situated in the same city where you work but your own house is outside that city. For example, suppose Mr A is working in Delhi and claiming HRA exemption for rented premises the tax officer cannot disallow such claim if his own house in situated outside Delhi.

You will have to ensure that your rental payments do not exceed the market value of similar property in your vicinity. Suppose you are paying a rent of around Rs. 40,000 for a 1 BHK house in Delhi, it clearly shows that it is a sham transaction. The income tax officer may disallow HRA exemption in such a case.

If you are staying in any flat of society of your relative, make sure to intimate the secretary of society about your tenancy.

If you are claiming tax deduction for EMI of home loan in your income tax return, do not claim exemption of HRA. However, you can claim both the deductions simultaneously if your own house is not in the same city in which you are working and you have taken rented accommodation in the same city where you are working.

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hydrabad

Hyderabad, the city of pearls is in news for various good reasons off-late. For the third year in the row, Hyderabad not only emerged as the best city in terms of living standards among Indian cities globally (Mercer’s Quality of Living rankings 2017) but also is on the way to a make a bigger news. Over the past few years, the city emerged to be one of the hottest innovation hubs, fueling startups through one of its kind initiatives. Driven by a government with progressive outlook and a thriving talent base, the city has set its eyes to be one of the world’s top 10 startup ecosystems in the world. While several stakeholders stand as drivers for this growth , there is one such player that stands out; T-Hub.

T-Hub , a unique public/private partnership between the government of Telangana and 3 of India’s premier academic institutes (IIIT-H, ISB & NALSAR) spearheads the innovation in the startup ecosystem in Hyderabad.The integrated incubator cum world class co-working space stands to be a nodal point attracting the best of the startups, mentors and investors.
One such startup that was nurtured out of this ecosystem to emerge as a one-of-its kind player is Paymatrix. The startup, that sprung out of a personal pain-point of the founding team comprising of graduates from IITs, IIMs, SPJain and BIT, Mesra ( Anusha Kurupathi Parambil,Mukesh chandra Anchuri, Muralidhar Nayak Guguloth). Paymatrix acts as an interface between tenants ,landlords and property managers and streamlines the rental payments and collections by facilitating credit from banks and NBFCs through smart analysis of payment behavior. This startup, often considered to be the first and largest in this Property rent management space, has a plethora of offerings including Renter’s insurance, Tenant Screening services and Digital Rent documentation , all of which makes the interaction between tenant and a landlord hassle-free and transparent.

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While this startup , incubated by T-Hub and NASSCOM 10000 is considered one among the fastest growing in the ecosystem, it added another feather today at HYSEA Design Summit and Awards 2017.
Paymatrix is not only rated among the 10 hottest startups in the Hyderabad ecosystem but also was awarded as winner of the Early stage Consumer startup at the Summit held today at Cybercity Conventions, Hyderabad. The event, attended by the best of the corporate and startup ecosystems in India is has key themes for 2017 to be Imagining Technologies, Digital Economy at X-roads, Designing the future and Weaving innovation into the mainstream.
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About HYSEA:
HYSEA ,considered among a key industry body, serves as a platform for its member IT majors and companies to interact with the government as well as compete in the global market. HYSEA also helps the government in formulating industry-friendly policies by providing incentives, concessions and support for foreign investors and entrepreneurs. Finally, it seeks to promote and encourage its member companies by instituting awards for various categories.
Further information about the Paymatrix and HYSEA can be explored by visiting www.paymatrix.in and www.hysea.in
The author of the content is a technology and startup enthusiast. For feedback on the content, please write back to us at [email protected]
Shopping online

Most of us, at one point of the time or other, have been a witness of that awkward expression from your landlord, when you asked him to accept the monthly property rent online. While the usual answer was ‘NO’ from the landlord, let me explain several reasons why you should not plainly take that answer.

  1. Paying the monthly rent online establishes an electronic trail for your transaction and can potentially support your claim for HRA exemption with your employer.
  2. If your landlord doesn’t stay beside your property, paying rent directly into the landlord’s bank account shall ensure that your local property broker or manager is not playing around with you.
  3. Setting up auto-debits and reminders to your account shall ensure that you pay rent on-time to your landlord and shall save you from that embarrassment when your landlord follows up for rent.
  4. It’s a good idea to pay rent deposit or advance online for it acts as a proof of payment and saves you from any surprises while requesting a refund on leaving the leased premises
  5. The cash payment which you paid to landlord usually remains an unaccounted income for him and is what that constitutes a brick of the Indian black economy, which we all love to endlessly discuss about.
  6. Lastly, it also saves you the pain to visit the nearest ATM situated few lanes away and withdraw chunks of cash for payment to landlord.
  7. Next time you are paying rent online, you are not only doing a service for yourself but also a service to your society and the nation!
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Founder

Every interesting startup has a story and so does Paymatrix. It all started when the Founder -Mukesh started working for Indian Oil Corporation Limited, Mumbai in 2010. When he first landed in Mumbai, he was taken back by two things; the buzzing crowd and the skyrocketed property rent prices in the city. While he quickly developed love with the first thing, the second one took quite a time for him to get accustomed. He saw his group of friends, with whom he stayed a while, paying as much as Rs. 35,000/- per month for a cramped apartment. The shocker came when his group of friends moved to a new location wherein the new landlord demanded a six months’ advance for the place. That was a heartburn for the group wherein they have to pool in such a money in short span of time.

It was this instance that stuck him to think if there was any way out to leverage his credit card for making the rent advance payment. Fortunately, he was holding three credit cards then and unfortunately, there was no way to leverage them to manage this huge payment. Somehow the group managed the payment to landlord through other means but the contemplation still remained in his mind – “When I have the option of paying my petty expenses and fees on credit, why don’t I have any for one of my regular mandatory expenditure -Monthly property rent?”.

This idea remained an idea for a while, wherein he moved on from the job at Indian Oil, completed his MBA from SPJAIN eventually and settled for a new job in Bangalore in 2015. At this point of time, interactions with his previous colleague and friend at Indian Oil Corporation Ltd.– Anusha Kurupathi, who then graduated from IIM-Ahmedabad and was working with Reliance Industries(Mumbai), brought back the idea back to life. The duo after due evaluation of the market decided to put in their papers by mid-2015 and get their hands dirty in solving the problems they once went through.

Starting from an apartment, the duo managed to bring a MVP live by Nov’15. It is at this point of time, they were joined by Muralidhar Nayak, a classmate of Mukesh at Birla Institute of Technology, Mesra. Murali was a technical lead at IGATE and was convinced of the potential of the idea he is going to get into. The trio since then built the platform into what is now the lone and leading rent management platform in the country, helping thousands to better manage and streamline their rent payments.