Scope of exemption u/s 10(13A). - Income Tax - 1388/CBDT

INSTRUCTION NO. 1388/CBDT Dated: March 3, 1981 Section 10(13A) of the I.T Act grants exemption to any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee to such extent as may be prescribed having regard to the area or place in which such accommodation is situated and other relevant considerations. Rule 2A of the Income-tax Rules 1962 prescribes the manner in which the exemption u/s.10(13A) is to be calculated. 2. The board have had occasion to consider the question whether an individual can claim the HRA granted to him by his employer exempt u/s.10(13A) if he resides in a house owned by the HUF of which he is a member and he obtains a receipt from the HUF for the rent paid by him to it. In order to satisfy the requirements of sec.10(13A) the following conditions will have to be fulfilled:- i) An assessee who is an employee should be granted a special allowance by his employer; ii)this special allowance should be specifically granted to him to meet expenditure which is actually incurred on payment of rent and; iii)the rent should be in respect of residential accomodation occupied by the assessee viz. the employee. An individual and an HUF are separate persons within the meaning of person u/s.2(31). Once an individual produces proof that he has actually incurred expenditure on payment of rent and this is in respect of the residential accommodation occupied by him, he would be entitled to the exemption provided by sec.10(13A) read with rule 2A. This position will hold good even when the receipt is issued under the signature of the individual himself but in his capacity as Karta of the HUF. The rent paid by the individual to the HUF would be assessable as a part of the property income in the hands of the HUF. 3.The decision of the Punjab and Harayana High Court in the case of justice S.C.MITTAL (121 ITR 503) where the High court has held that the exemption u/s.10(13A) will be admissible even in a case where an individual resides in his own. Special leave to appeal has been granted by the Supreme Court. 4. These instructions may kindly be brought to the notice of all officers working in your charge.