Tax Talk

I live in a rented apartment but do not get house rent allowance (HRA) from my employer. Is there any tax break I am entitled to for the rent I pay?

Any individual who is not in receipt of house rent allowance referred in Section 10 (13A) of the Income Tax Act 1961 (“Act”) can claim deduction for the rental expenditure subject to certain conditions. The conditions prescribed under Section 80GG for claiming the deduction are:

a) The individual or spouse or minor child should not own a residential accommodation in the place where the individual resides or performs duties of employment/business;

b) The individual is not claiming any other residential accommodation located in a different place as self-occupied;

c) The rent paid in excess of 10 per cent of the total income can be claimed as a deduction. However, such deduction shall not exceed ₹5,000 per month or 25 per cent of total income, whichever is less.

On the documentation side, the individual should file a declaration in form 10BA along with the tax return.

Last year, there was a composite scheme of arrangement between

1. Grasim Industries Ltd

2. Aditya Birla Nuvo Ltd

3. Aditya Birla Financial Services Ltd

Under Sections’ 391 to 394 and Sections’ 230 to 232 of the companies Act 2013. As per the scheme:

A. Aditya Birla Nuvo Ltd was amalgamated with Grasim Industries Ltd

B. Aditya Birla Financial Services Ltd (previously a part of Aditya Birla Nuvo Ltd) was demerged from Grasim Industries Ltd.

Kindly guide me about income tax implications of the above arrangement for shareholders of Aditya Birla Nuvo Ltd and Grasim Industries Ltd.

The scheme would have to be analysed in detail to confirm specific tax implication. Generally, in a scheme of arrangement involving amalgamation/demerger, which in is compliance with the provisions of the Income Tax Act, the following transfer/issue of shares is exempt from tax:

a) Transfer of shares by shareholders of the amalgamating company in consideration of allotment of shares by the amalgamated Indian company;

b) Transfer or issue of shares by the resulting company to the shareholders of the demerged company in consideration of demerger Accordingly, if the scheme is in compliance with the provisions of the Income tax Act, then there would not be any tax liability for the shareholders.

The writer is Partner, Deloitte India

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