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August 26, 2020

Salaried individual not receiving HRA can still claim deduction of rent paid in ITR

Salaried individual not receiving HRA can still claim deduction of rent paid in ITR

Normally HRA is a component of salary for which the employee gets exemption up to a certain limit mentioned in section 10(13A). Where the employer does not provide HRA to the employee than in such case the employee can still claim the deduction of the house rent paid by them during the financial year under section 80GG. In this article we will learn about section 80GG of Income Tax Act.

What are the conditions to claim deduction under section 80GG?

Following are the conditions that must be fulfilled for claiming deduction under section 80GG:

  • The assessee must be self-employed or salaried
  • The assessee must have not received HRA at any time during the year for which deduction are been claimed under section 80GG
  • HRA component should not form part of your salary to claim 80GG.
  • The expenditure incurred by him on rent of any furnished or unfurnished accommodation should exceed 10% of his total income arrived at after all deductions under Chapter VI A except section 80GG.
  • The accommodation should be occupied by the assessee for  the  purposes  of  his own residence
  • The assessee or his spouse or minor child or HUF of which he is a member – do not own any residential accommodation at the place where he is currently reside, perform duties of the office, or employment or carry on business or profession.
  • In case the assessee own any residential property at any place, for which your Income from house property is calculated under applicable sections (as a self-occupied property), no deduction under section 80GG is allowed.

What is the amount of deduction under section 80GG?

The maximum deduction an assessee can avail will be Lower of the below amount:

  • Rs. 5,000 per month
  • 25% of Adjusted Gross total income
  • Actual rent less 10% of Adjusted Gross total income

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Note:

Adjusted Gross total income refers to income not including long term and short-term capital gains. Here, only those short-term capital gains shall be excluded which are taxed at 10% that is u/s 111A. Also, adjusted total income refers to income excluding income u/s 115A to 115D and deductions from 80C to 80U.

How to avail deduction under section 80GG?

The assessee will be required to file Form 10BA which is a declaration to be filed by the assessee along with details of payment of rent on the income tax e filing portal in order to avail deduction under section 80GG.

Understanding with examples:

Mr. X Total Income is Rs. 7,50,000. During FY 2020-21 he paid rent of Rs. 12,000 per month.

The deduction under section 80GG will be Lower of the following amount:

i. Actual rent paid less 10% of total income = Rs. 1,44,000 – 75,000 (7,50,000 X 10%)= 69,000, or

ii. 25% of total income: Rs. 7,50,000 X 25%= 1,87,500, or

iii. Max Rs. 5,000 per month = Rs. 60,000 (Rs. 5000 X 12 months)

So, Mr. X can claim maximum Rs. 60,000 as deduction under section 80GG. Also before filing Income tax return for FY 2020-21 Mr. X must file Form 10BA on the income tax efiling portal.

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