Jigar M. Patel
International Tax Attorney
Deduction for Salaried or Self-Employed not in receipt of HRA
Salaried employees, who incur liability for payment of house rent and who receive House Rent Allowance (HRA) from their employer, can avail the benefit of exemption as per the norms of Section 10(13A) of the Income-tax Act.
However, any other person (whether in employment or otherwise), who is not in receipt of HRA is also entitled to a deduction in respect of house rent paid under the provisions of Section 80GG.
Conditions for eligibility of Deduction
Under Section 80GG, such an individual is allowed deduction in respect of any expenditure incurred towards payment of rent for furnished or unfurnished accommodation occupied by him for the purpose of his own residence, if the following conditions are satisfied:
- He should not be in receipt of any HRA, in case he is a salaried employee.
- He or his spouse or minor child or Hindu Undivided Family (HUF) of which he is a member, should not own any residential accommodation at the place at which he ordinarily resides, performs duties of his office or employment or carries on his business or profession.
- If he owns residential house at any other place, then in that case, he should not be claiming the concession of declaring the annual letting value of the said house property at ‘Nil’ under the provisions of Section 23 of the Income-tax Act.
- He fills in a declaration in the prescribed Form 10BA and files the same online from his e-filing portal alongwith the filing of his ITR. In this Form, the taxpayer is required to declare the amount of the rent paid and the name and address of the landlord to whom such rent is paid.
Eligible Amount of Deduction
Under Section 80GG, the amount eligible for deduction out of the gross total income of the taxpayer is the least of the following three amounts:
(a) Rs.5,000 per month i.e. Rs.60,000 per annum
(b) 25% of the total income
(c) The excess of actual rent paid over 10% of the total income
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Illustration: Pandya’s total income for the Assessment Year 2024-25 is Rs.9,00,000 and he is paying house rent of Rs.15,000 per month. He fulfills the requisite conditions for eligibility for deduction under Section 80GG. On the facts of the case, he would be entitled to the least of the following three:
- 60,000 (Rs.5,000 x 12)
- 25% of the total income of Rs.9,00,000 i.e. Rs.2,25,000
- 90,000 being rent paid in excess of 10% of total income (Rs.1,80,000 – Rs.90,000)
Accordingly, the deduction available to Pandya under Section 80GG would be Rs.60,000 and his effective taxable income would work out to Rs.8,40,000 (Rs.9,00,000 – Rs.60,000).
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