Latest Reforms Landlords And Tenants Must Know Of
Are you a corporate employee claiming House Rent Allowance (HRA) by submitting rent receipts of the house owned by your father or family? It may not be possible from this fiscal year.
According to the recent ruling, an assessing officer from the Income Tax department can ask for other documentary evidence to check whether or not your tenancy is real. The officer may ask for electricity and water bills to check on home ownership and tenancy and even ask for a letter from the housing society or the Resident Welfare Association (RWA) confirming of the tenancy.
Until the past fiscal year (2016-17), a large number of employees used to submit rent receipts of their family house in order to claim the HRA benefits under section 10(13A) of the IT Act. Along with the rent receipts, there was a provision to provide a copy of landlord's Permanent Account Number (PAN) in case of rent amount exceeding Rs 1 lakh a year. If the landlord couldn't provide a PAN card copy, then one could also submit declaration in this regard.
However, these practices will come under the scanner beginning from the current fiscal year (2017-18).
With this move, the property rental market in India has silently undergone a phase of several other substantial reforms in the past few months.
Are you paying a rent exceeding Rs 50,000 a month?
If yes, then you are required to withhold tax at five per cent on rental payments under section (194IB) of the IT Act. You will also have to deposit this tax within a prescribed time limit.
So, discuss this provision with your landlord at the earliest. Also, do not make delays in this regard.
Through this new provision, the IT department plans to widen the scope of Tax Deduction at Source (TDS) and curb tax evasion. The department will keep a close check on property owners receiving high rental incomes.
Way forward: New Model Tenancy Act
In April 2015, the Ministry of Housing and Urban Poverty Alleviation had drafted a Model Tenancy Act. Since then a number of state governments have expressed their intention to implement it. Here are 10 things you need to know about Draft Model Tenancy Act.
In July 2017, the Karnataka government announced its readiness to implement the new Act.
How does it impact you as a tenant?
Here are the major points you should know:
- The Act sets the minimum amount of security deposit to three months' worth of rent.
- It will be mandatory to register a rental agreement exceeding 11 months period.
- A tenant would not have any right to stay in a home after the period of six months of expiry of the rental agreement.
These points look to be skewed towards landlords as it has been argued that the current legislation is misused by some tenants when it comes to vacating properties. However, it is expected that the upcoming changes in the current state-enacted Rent Control Acts will adopt a well-balanced approach towards both landlords and tenants.
Meanwhile, the Ministry of Housing and Urban Poverty Alleviation has also come up with a draft National Urban Rental Housing Policy.