BackRental payments to relatives may invite the taxman’s scrutiny
As per Section 10(13A) of the Income Tax Act, any allowance specifically granted to an employee to meet the expenditure actually incurred on payment of rent for a residential accommodation occupied by him/her shall be exempt from tax to the extent prescribed
PremiumI worked for Company A for two years before joining Company B. I left Company B just three months after joining. I have two PF member IDs with one UAN. I’d like to withdraw my PF and pension amount from Company A. Am I eligible to withdraw my full pension?
—Zishan Khan
We have assumed that you are an Indian citizen and your KYC has been completed. We have also assumed that Company A is your first employer.
In relation to withdrawal of your PF and pension amount with Company A, you will need to submit an online claim form. Once the particulars are verified and the forms are submitted (Form 19 and Form 10C), the withdrawal application shall be processed. After due check and verification by the authorities, the accumulations would be credited to your designated bank account.
It may be noted that if you have worked for less than six months, the pension contributions cannot be withdrawn as the rules say that for those who have not yet completed six months in service, the withdrawal benefit is not available.
Accordingly, in case you apply for the withdrawal of your corpus with the PF account of Company A and the PF account of Company B separately, you shall not receive the pension balance in your PF account with Company B.
However, in case the balance in the PF account of Company A is transferred to the Company B account, the total service shall be more than six months and you shall be eligible to withdraw your pension balance in your account with Company B as well.
Please note that as the cumulative service period in both companies is less than five years, there would be tax implications in your hands at the time of withdrawal even if you transfer the balance in the PF account of Company A to the account with Company B.
I’m an IT sector employee and I stay with my parents at a rented accommodation in Madhya Pradesh. My parents own a house in a nearby town. Can I claim HRA for their house while I live in a rental house at a different place? I will be able to provide all valid documents such as rent receipts, electricity bill, rental agreement, etc.
—Name withheld on request
As per Section 10(13A) of the Income Tax Act, any allowance specifically granted to an employee to meet the expenditure actually incurred on payment of rent for a residential accommodation occupied by him/her shall be exempt from tax to the extent prescribed.
Accordingly, the primary condition to be eligible for claiming HRA exemption is that the rented property should be occupied by you. In the instant case, it appears that the parental house against which you propose to claim the HRA exemption will not actually be occupied by you. In such a case, you shall not be eligible to claim exemption for the rent paid to your mother towards such accommodation, which is not occupied by you.
Also, please note that any rental payments to relatives may in any case be prone to further scrutiny by the tax authorities.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
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