Not getting HRA Still you can claim rent paid as deduction under Income Tax Act
House Rent Allowance, or commonly known as HRA, is an amount which is paid by employers to employees as a part of their salaries. This is basically done as it helps provide employees with tax benefits towards the payment for accommodations every year. The decision of how much HRA needs to be paid to the employee is made by the employer on the basis of a number of different criteria such as the salary and the city of residence.
Regulated by the provisions of Section 10(13A) of the IT Act, the house rent allowance serves to be quite beneficial to salaried employees in India. As per law, only salaried employees can claim HRA and self-employed individuals are exempt from doing the same. HRA, as an exemption is provided, only if the employee is living in rented accommodations. However, also in case the employee lives in his or her own house and does not pay any rent, he or she cannot claim HRA to save on taxes.
However, not everyone can avail the benefit of HRA. To provide individuals with benefit w.r.t rent, Section 80GG was introduced. Section 80GG is a special provision under Chapter VI-A of the Income Tax Act, 1961, which provides tax reprieve to those who do not avail house rent allowance. In this article we will learn about section 80GG of Income Tax Act.
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
Such deduction shall be subject to such other conditions or limitations as may be prescribed, having regard to the area or place in which such accommodation is situated and other relevant considerations.
What do you mean adjusted total income?
Adjusted 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.
The adjusted total income = Gross Total Income – Long Term Capital Gain – Short Term Capital Gain subject to tax at 10% – deductions under sections 80C to 80U – income from the foreign company.
Section 80GG shall not be included in the above deductions from 80C to 80U.
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 details are required to be provided while claiming deduction under Section 80GG?
Those seeking to avail this tax rebate need to submit a duly filled Form 10BA to the government beforehand. This Form is a declaration that the individual filing it does not claim benefit from a self-occupied property in any location.
The details required to be submitted are:
- Name of the assessee
- Full address of the premises along with Postal Code
- Tenure (in months)
- Payment Mode
- Amount Paid
- Name of landlord
- address of the landlord.
- PAN of the landlord is mandatory if rental is more than Rs 1 lakh for the assessment year.
- A Declaration confirming that no other house property is owned by the taxpayer himself or in the name of Spouse / minor child or by the HUF of which he is a member.
Steps to file Declaration u/s 80GG(House Rent) online:
Below is the stepwise process to file form 10BA:
Step 1: Go to Income tax e filing and Login on portal using your Login Credentials
Step 2: Now, go to e filing tab and select “Income tax forms” option
It will redirect you to Income tax forms page
Step 3: Now, select Form name as “Form no 10BA- Declaration u/s 80GG [House Rent]” from the drop down
Select the assessment year for which the declaration is to be filed and
Select submission mode as “Prepare and Submit online”
Step 4: Filing form 10BA
Now, enter the below details in the form:
1. Financial Year for the relevant Assessment year
2. Name and address of the Land lord
3. Address of the rented property
4. Period of rent agreement in months
5. Total amount of rent paid
6. Mode of payment of rent i.e. in cash, crossed cheque, bank draft or online transfer
Step 5: Final Submission
Now, click on Preview and Submit button and submit the form