Save tax on rent paid – 80GG. Even if no House Rent Allowance?

14th January 2011 Commonly known to most of the individual tax payers: Salaried individuals: Pay rent > Receive House Rent Allowance (HRA) as part of the salary > Get tax exemption on HRA income Not known to most of the Individual tax payers: Any Individual: Pay rent > Get tax exemption on amount paid as rent Yes, what you have read is very true and very simple. Just read on …. What does the provisions say ? If you are an Individual (Salaried, businessmen or a professional) paying rent for your own accommodation and not having a residence owned by either you, your spouse or your minor (Less than 18 years) child, at the place where you normally reside and conduct your job or business or profession, or at a place other than as stated above, where you claim any benefit from the owned house under the provisions of the Income Tax Act, 1961 (“The Act”), e.g. Deduction of Interest paid on house loan – 80C, than you can claim deduction under section 80GG of The Act, for the purpose of calculation of total income and income tax thereon. Amount that can be claimed as exemption The exemption shall be the lower of the following:

  1. Rs. 2000 per month
  2. Total Rent paid in excess of 10  per cent of the Total Income
  3. 25 per cent of Total Income.

For this purpose, the Total Income means the gross total income as reduced by:

  • Long-term capital gains & short term gain charged at special rates of taxes.
  • All deductions except deduction u/s 80GG

Conditions for claiming exemption

  • You need to declare that you are paying the rent by filing requisite form; and
  • The Individual should not be in receipt of house rent allowance from his employer.

Conclusion: In simple words, if you are staying in a rented accommodation then you can claim relief under the provisions of The Act and reduce your tax liability. Again, for claiming the relief you need not be a salaried individual and you need not earn house rent allowance. This particular deduction is for every body and on every income, if you fulfill the above conditions. We at aim to free you from all tax worries so that you can concentrate fully on your core expertise and optimise your career potential. We at provide full year support solving all your tax issues, in addition to filing of your return of income with excellent tax planning. Please join us now in pursuit of simplifying individual taxation! Team TAXMANTRA

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