Tag: rent

Does the Model Tenancy Act make life easier for tenants and landlords?

Personal Finance

[ad_1]

Read More/Less


Renting a home is a necessity for many. But the legal structure and practical strains in the relation makes it an ordeal to go through the tenancy process – for both tenants and landlords. The laws relating to the tenancy aspects were often outdated and dispute resolution in civil courts was slow and onerous. The Model Tenancy Act 2021, approved in June, tries to address these deficiencies.

The key aspect of the Act is that it makes it compulsory for the parties to have a written agreement that lays out important terms such as the rent, security deposit and maintenance responsibilities. This must be submitted digitally to the Rent Authority (which will be formed in each State) to receive a unique identification number for the agreement.

For tenants

One, on the payments front, there are points to cheer. Security deposit amount is capped at a maximum of two month’s rent in case of residential premises and a maximum six month’s rent in case of non-residential/commercial premises. You can also ask for a rent reduction if the building structure had deteriorated and the owner does not renovate. And if the premise becomes uninhabitable – say due to an event of force majeure – the landlord shall not charge rent until it is restored. There is also provision to receive interest from the owner if the rental deposit is not returned within the stipulated time, after vacating.

Two, the owner’s right to visit and evict are laid out. They are required to give a notice of at least one day in advance, so that they or appointed property manager, can enter the premises. The permissible purposes of the visit – for example routine inspection – are also laid out in the Act. The landlord can only evict a tenant if there are violations such as rent defaults for two consecutive months or misuse of property; as well as making renovations that cannot be completed without the tenant moving out.

Three, the Act has exceptions and is not applicable for certain types of properties. For instance, buildings owned by governments, educational institutes, companies and religious or charitable organisations and a few other categories are not under its preview.

For landlords

One, the Act gives leeway in fixing the rent amount and escalations. The permissible rent and terms on periodic increase are left to negotiation with the tenant. Also, if structural improvements, additions or alterations are done, the landlord can choose to charge higher rent. If this is disputed, the Rent Authority may determine the revised rent and also fix the date from which this becomes payable.

Two, there is compensation to landowners if the tenant does not leave the premises after the rent agreement term expires. You can charge double the monthly rent for the first two months and four times after that until the tenant vacates.

Three, the ill-understood sub-letting aspects are better laid out. The tenant cannot sub-let the premises without a written permission from the owner and it also requires a supplementary agreement. The landlord and tenant must jointly inform the Rent Authority about the sub-tenancy within two months from the date of execution of the agreement.

Practical aspects

That said, there are some caveats to consider when the Act translates to implementation on the ground. One, it is a model framework and is not binding on the States.

It is likely that many will implement their own version, as they see fit. And many progressive States, such as Tamil Nadu already have their own regulation (Tamil Nadu Regulations of Rights and Responsibilities of Landlords and Tenants Act 2017).

One example where States may want to take a different view may be in the prescriptive nature of the maintenance responsibility of tenants and owners – there are 14 items including replacement of glass panels in doors and windows is listed as part of periodic repair to be done by the tenant.

Two, even if they adopt most aspects – as we saw in the case of RERA – it could potentially take a long time before we start to see changes. For example, while the aim is to increase the speed of dispute resolution- by moving the cases from Civil Courts to a new authority –operationalising this would be time consuming.

There is support needed at local level to set up the Rent Authority (headed by an officer appointed by the District Collector or District Magistrate), Rent Court (headed by Additional Collector/ Additional District Magistrate rank officer) and the Rent Tribunal (which has the highest authority over the decisions of the other two).

The author is an independent financial consultant

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

SucSEED Angel, IIIT-H fund exit Paymatrix

Banking & Finance

[ad_1]

Read More/Less


SucSEED Angel Network and IIIT-Hyderabad’s seed fund have exited from Paymatrix, a fintech start-up established in 2016.

The two entities were offered an exit by the founders and Muthoot group that invested into the start-up.

The financial consideration for the two exits have not been revealed by the start-up.

The start-up lets users pay their rents, rental deposits and maintenance payments online using credit cards, giving them a window of credit-free period of 45-50 days.

The start-up, with a base of 82,000 users, processed ₹200 crore payment requests so far.

“Paymatrix was one of our very promising early-stage investments at IIIT-H Foundation. We believe that this partnership and investment from Muthoot group shall enable them to scale greater heights,” Ramesh Loganathan, COO at IIIT-H Foundation, said in a statement.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

Know how the rent collected is accounted for I-T purpose

Personal Finance

[ad_1]

Read More/Less


Request response on the following questions on tax pertaining to undivided property and tax applicable to rent:

1. Can the rent allotted from undivided properties located in urban neighbourhood be considered separately under Hindu undivided family account for income tax purpose? If this rent is less than minimum slab, is it necessary to file an undivided family account?

2.A Father occupies a house with the name of his son, he pays a nominal rent as a relief to his son. Whether this can be considered as a gift and gets relief for the son from paying income tax?

3. When an individual owns only one house in an urban neighbourhood and collects a rent. He however, stays in another town for living. How is the rent accounted for IT purpose?

4. An individual has purchased a house using a housing loan — EMI basis in a city– and has a house in an urban neighbourhood and collects a nominal rent. Which I-T form needs to be used? The first house has not yet been transferred to his name. How is this rent accounted for I-T purpose?

— Raman

1) Pursuant to section 22 of Income Tax Act, 1961 (the Act), rental income derived from the undivided property owned by the Hindu undivided family (HUF) shall be assessed in the hands of HUF. Further, if the total income derived by the HUF in a financial year (FY) is less than the basic exemption limit (₹250,000 for the FY 2019-20) HUF is not required to file the Income tax return (ITR). However, if the HUF had deposited amounts exceeding one crore rupees in one or more current accounts during the FY or incurred foreign travel expenditure exceeding two lakh rupees or electricity expenditure in excess of one lakh rupees then tax return has to be filed even if the total income is below the basic exemption limit.

2) We understand that the house property is owned by son and his father pays nominal rent for occupying the house. As the underlying transaction is occupation of the house and payment of rent therefore, such payments by father to son ought not be regarded as ‘Gift’ under section 56 (2) (X) of the Act. Accordingly, such rental income earned by the son need to be offered to tax under the head ‘House Property’.

3) Rental income earned by the individual from the property located in urban neighbourhood is liable to tax under the head ‘House property’. Standard deduction of 30 per cent on such rental income earned and actual municipal taxes paid could be claimed as deduction under the Act. Further, interest on housing loan (if any), without any deduction limit can be claimed under section 24 of the Act.

Further, where the individual stays in a rented accommodation in another town for his living, he may claim, either of : Exemption of house rent allowance (HRA) u/s 10(13A) of the Act, if he is a salaried person, or Deduction u/s 80GG of the Act, subject to fulfilment of specified conditions.

4) Based on the details provided, a house property is owned by the individual and the same is currently let out. He earns a nominal rental income from that property. As per section 23 of the Act, the annual value of the property let out during the year shall be higher of the actual rent received/ receivable or fair rental value for which the property is expected to let out.

For let out property, rental income shall be offered to tax while filing the tax return and specified deductions (30 per cent standard deduction, municipal taxes paid and interest on housing loan) can be claimed. With respect to the other house property which is not transferred to the name of the individual, it may tantamount to not having a legal ownership in that property and the eligible deductions with respect to interest/principal payment may not be claimed under the Act. It needs to be further analysed based on the documents in place. For property under-construction, any interest paid before possession is tax deductible in five instalments beginning from the year in which construction was completed under the Act. Deduction for interest on housing loan is capped at ₹200,000 for a self- occupied property and the amount of principal payment can be claimed up to ₹150,000 u/s 80 C of the Act, subject to conditions.

Use of IT form: ITR 1 could be used if the income is less than ₹ 50 lakhs in a FY and the individual has salary income, one house property, further subject to specified conditions.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,