Renting a house in Bangalore

You can find some fantastic tips on how to go about find a house for rent in Bangalore here:
http://merelafz.blogspot.com/2008/09/renting-house-in-bangalore.html


One point not mentioned in that post is that the rental agreement may have some fine print about the rent. For example, the owner may mention verbally that the rent would be Rs. 10000, but the agreement may mention something like "Rs. 5000 as rent of the premises and Rs. 5000 as rent for fittings". Do not fall for this trick. It is true that you would pay the same amount each month, but what eventually happens is that only the Rs. 5000 qualifies as HRA for tax exemption. This implies that, you are paying upto Rs. 1500 (if you reach the tax slab of 30%) as tax on the money that would otherwise have qualified as your house rent. The IT department do not lose (actually, they stand to gain), as the tenants usually fall under a higher tax bracket than the house owner (or at least the house owners who are involved in this kind of mischief). Of course, there is a rule to prevent double taxation, but going by the agreement, this amount never qualified as rent, so the rule does not apply.


This practice might have started with good intentions, where owners might have "fitted" some extras which they got for rent, and the tenant agreed to pay for those fittings over and above the rent. Naturally, in those circumstances, the landlord would pass on the "rent for the fittings" part to wherever it is brought from. Things may also be relaxed a bit, where the landlord makes an initial investment, and uses this additional amount towards recovering it. Think of installing an air conditioner, for example. A tenant might ask for it, but might not want to buy it. So, the solution is for the landlord to buy it and recover additional amount from the tenant.

One may suggest that this additional amount could have been part of the actual rent itself, just like what happens for furnished houses, but in that case, the tax liability of the landlord increases. Hence, this clause in the agreement. This practice, however, has now been dragged to the level of dishonesty, and the clause exists for the simple reason that the landlord pushes his tax liability to the tenant. So much so that the only fittings the first house I had taken on rent in Bangalore had were for lights, fans, curtain rods, and the commode. That is, there was nothing that should not be in a house by default. Yet, this clause was included in the agreement, and I had foolishly accepted it (I did ask about why the breakup was mentioned, but the smart reply was that "this is standard in Bangalore"). I realized only much later, when the finance guys in my company cut down my HRA amount to be considered, that I had celebrated too early on finding a "reasonably priced" house in Bangalore.

In conclusion, if you find some fancy stuff in your rental agreement, be sure to take it up with the house owner and get it rectified before you sign it.