House Rent Allowance forms part of your salary only if your company policy provides so but just receiving it doesnâ€™t mean that you are eligible to claim deduction of the same. So, if you are paying rent than you can claim exemption for HRA even if your employer provide the exemption of the same or not. Moreover, if you are not receiving HRA and still paying rent then you claim deduction of rent paid u/s 80GG.
Taxmantra.com here let down here all the relevant facts related to this-
1.Â When HRA is received and rent is paid exemption can be claimed-
A person who is earning salary income and receives House Rent Allowance (HRA) can claim exemption u/s 10(13A) regulated by rule 2A. Further, the least of the following can be claimed as exemption from tax:
- Amount actually received as HRA in respect of the period occupied by the employee as rental accommodation during the previous year.
- Amount actually paid as rent less 10% of Salary.
- 50% of Salary if the residential house is situated at Kolkata, Mumbai, Delhi or Chennai and 40% of salary if the residential salary is situated at any other place.
Further, the following points should be considered while computing exemption:
- For this purpose â€œSalaryâ€ means basic salary and dearness allowance (if the term of employment so provides). It also includes commission based on a fixed percentage of turnover achieved by the employee during employment, but excludes any other allowances or perquisites.
- Exemption cannot be claimed if the employee lives in his own house or if he does not pay any rent for accommodation.
2.Â When HRA is not received but rent is paid deduction can be claimed-
If a person who does not receive HRA but pays rent for accommodation can also claim deduction u/s 80GG. The deduction can be claimed only if the following conditions are met:
- A person is self employed and/or a salaried employee and does not receive any HRA at any time during the previous year.
- Â He or his spouse or minor child or the HUF (if he is a member) does not own any residential accommodation at the place where he performs his duties of office or employment or carries on his business or profession.
- The person should file a declaration in Form No. 10BA showing the amount paid towards rent.
Amount which can be claimed as deduction is least of the following:
- Rs. 2,000 per month.
- 25% of Adjusted Gross Total Income.
- Actual Rent paid less 10% of Adjusted Gross Total Income.
For this purpose â€œAdjusted Gross Total Incomeâ€ means Total income after excluding Long-term capital gains, Short-term capital gains u/s 111A, and income referred to in section 115A or 115D and amount deductible u/s 80C to 80U but before making any deduction under this section.