How to claim deduction for rent paid if HRA is not part of your salary?

how to claim deduction for rent paid if HRA is not part of your salary
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How to claim deduction for rent paid if HRA is not part of your salary?

Every organization has its own way of structuring the salary components.  Some include HRA, LTA etc as a part of salary and some don’t. Most of us looking at the cost of real-estate may not own property but would be residing in a rented accommodation. For the ones who do not have HRA as a component of salary need not worry as there is another section 80GG which allows to claim the deduction for the rent paid.

Section 80GG – Deductions in respect of rents paid

Who can claim deduction under section 80GG?

An individual whether a resident or a non-resident paying rent in respect of any furnished or unfurnished accommodation occupied by him/her for the purposes of his/her own residence.

  • Either a self-employed
  • Or a salaried individual
    • who does not have HRA component as a part of the salary structure.
    • who is not provided with any rent-free accommodation.

Note: HRA or rent-free accommodation should not be received by an assessee during any month/period of the year.

Conditions for claiming deduction u/s 80GG

No deduction under this section shall be allowed if any residential accommodation is,—

  •  Owned by the assessee or by his spouse or minor child or, where such assessee is a member of a Hindu undivided family by such family, at the place where he ordinarily resides or performs duties of his office or employment or carries on his business or profes­sion;
  • Owned by the assessee at any other place, being accom­modation in the occupation of the assessee, the value of which is to be claimed as self-occupied property for the purpose of computation of income under the head of house property.

What is the maximum deduction allowable under section 80GG?

Deduction allowable u/s 80GG will be least of the following

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

Note: Total income under this section will be calculated as gross total income minus long-term capital gains, short-term capital gains where Securities Transaction Tax (STT) has been paid and deductions available under Sections 80C to 80U, except Section 80GG.

Relevant section 80GG from the Income Tax Act,1961

“In computing the total income of an assessee, not being an assessee having any income falling within clause (13A) of section 10, there shall be deducted any expenditure incurred by him in excess of ten per cent of his total income towards payment of rent (by whatever name called) in respect of any furnished or unfurnished accommodation occupied by him for the purposes of his own residence, to the extent to which such excess expenditure does not exceed five thousand rupees per month or twenty-five percent of his total income for the year, whichever is less, and 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:

Provided that nothing in this section shall apply to an assessee in any case where any residential accommodation is,—

  (i)  owned by the assessee or by his spouse or minor child or, where such assessee is a member of a Hindu undivided family by such family, at the place where he ordinarily resides or performs duties of his office or employment or carries on his business or profes­sion; or

 (ii)  owned by the assessee at any other place, being accom­modation in the occupation of the assessee, the value of which is to be determined under sub-clause (i ) of clause (a) or, as the case may be, clause (b) of sub-section (2) of section 23.

Explanation.—In this section, the expressions “ten percent of his total income” and “twenty-five percent of his total income” shall mean ten percent or twenty-five percent, as the case may be, of the assessee’s total income before allowing deduction for any expenditure under this section.”

 

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About CA Ankita Khetan 161 Articles
Ankita is a Chartered Accountant in practice and holds a Diploma in IFRS (from ACCA, UK). She is also a Commerce PG and Certified Independent Director (from IICA). She holds a certification in Forex and Treasury Management. Her area of expertise is GST and Income tax. She is passionate about reading, writing, and sharing knowledge on areas related to finance and taxation.

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