Taxing self-leased accommodation:: Business Line

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I am an employee of Central Public Sector Undertaking and posted in New Delhi. I am entitled for company leased accommodation in lieu of HRA. I provided my own flat in New Delhi to the company as self leased accommodation, for which the company is paying me Rs 16,200 a month (Net after TDS 18,00-1,800) as rent. Simultaneously, the company is adding some perquisite value (Rent Free Accommodation) in my salary income for TDS from my salary.

Now at the time of filing my ITR, would I need to calculate my income from house property? If so, please tell me the calculation of same to avoid double taxing (perquisite value already added to my income from salary) of net amount of rent received is Rs 16,200 only. — Mehar Chand

According to the Income-tax Act, 1961 (the Act), separate methodologies have been prescribed for valuing the taxable benefit arising on account of rent free accommodation by the employer and income received by an individual as rent from house property. Accordingly, the rent free accommodation provided by your employer and lease rentals received by you as an individual would be taxed separately in your hands according to the provisions of the Act.

In your case, rent free accommodation provided by the employer would be taxable under the head “Income from salary”. The same will be valued according to the method prescribed under the Act. The employer would add this value in your salary income as perquisite and deduct tax on the same at applicable tax rates.

Separately, the house rent received by you shall be taxed in your hands under the head “Income from house property”. House property income to be taxed would be computed by firstly, determining the gross annual value which would be Rs 18,000 multiplied by the number of months the house rent was received. Thereafter, you will be entitled to claim the deduction towards municipal taxes paid, flat 30 per cent of annual value and interest paid on housing loan availed, if any, during the concerned Financial year (FY). The net rental income after considering the aforesaid deductions shall be taxed according to the applicable income tax slab rates.

Once you have determined the gross tax liability on rental income, you can claim credit of the tax deducted at source (Rs 1,800 a month) by the company from the rent paid to you and pay the balance tax in advance within due dates according to the instalments prescribed under the Act.

At the time of preparing your income-tax return, you would have report both income from salary and house property along with the taxes paid on the same.

My employer provides me Form 16 and the same is filled as IT returns. This has details pertaining to my investments in 80C & 80D. I also invest in mutual funds via SIP. Recently I met a friend who informed me to refile my all my IT returns again declaring my investments in mutual funds too. What should I do now because according to my employer these details are not mandatory /required as it does not come under 80C (non ELSS funds). Kindly advise. — Rajesh

As you mentioned, the investments made by you are in non-ELSS funds, which do not qualify for deduction under section 80C of the Act, the requirement for such investments was in form of disclosure in the income tax return. The requirement of reporting specified investments and payments such as investments in Mutual Fund (MF) was made applicable by the Central Board of Direct Taxes (CBDT) from the FY 2006-07 onwards. However, this disclosure requirement has been done away with from the FY 2010-11.

According to the erstwhile provisions, an individual tax payer was required to declare high value transactions with bank, investment in MF, credits card payments, etc. via the Income tax return in the Annual Information Return (AIR) block. The applicable threshold for investment in MF was of Rs 2, 00,000 during the FY. Accordingly, the onus to disclose the specified transactions in AIR is on the individual while filing his Income tax return irrespective of whether the investments or payments has been disclosed to his employer.

Thus, in case you had not disclosed the MF investment exceeding threshold of Rs 200,000 in the AIR block in any of the Income tax returns, you have an option to revise the tax returns. Under section 139(5) of the Act, an individual could revise the tax return within one year from the end of the Assessment Year in which the tax return has been filed with the Tax Authorities provided the original tax return has been filed within the due date. Accordingly, you have an option to revise the tax return only for the FY 2009-10 as the due date for revising the Income tax return for the earlier FYs is time barred.

(The author is Executive Director, Tax, KPMG.)