Most salaried individuals, who stay in rented accommodations, are eligible to claim tax deduction on rent paid out of the House Rent Allowance (HRA) they get. As per Rule 2A under Section 10(13A) of the Income Tax Act, the deduction a salaried individual may claim is least of –
(i) actual HRA received,
(ii) rent paid over 10 per cent of salary (basic + DA) and
(iii) 50 per cent of salary (basic + DA) for rented accommodations in metro cities or 40 per cent of salary (basic + DA) for rented accommodations in non-metro cities.
But can an individual – like a retired person, professional, or a self-employed person or others – who doesn’t receive HRA, claim tax deduction on rent paid?
“Yes, tax benefits on rent paid can be claimed under Section 80GG,” said CA Karan Batra, Founder and CEO of CharteredClub.com.
Provisions u/s 80GG
The benefit of tax deduction u/s 80GG is available only to individuals who are self-employed or salaried (but don’t get any benefits u/s 10(13A) on HRA) and don’t claim tax benefits on the expenses for rent paid under any other section of the Income Tax Act.
However, the benefits u/s 80GG will not be available, if a taxpayer himself/herself or his/her spouse or minor child or the Hindu Undivided Family (HUF) of which he/she is a member owns any accommodation at the place where the taxpayer is employed or carries on his/her business or profession.
To avail the benefits u/s 80GG, a taxpayer, who owns any property at any place other than the place where he/she is employed or carries on his/her business or profession, should not be claiming any tax benefits on that property as Self-Occupied Property and the said property is deemed to be let-out for tax purpose.
Amount of Tax Benefit
In Budget 2016, the amount of tax benefits u/s 80GG, which an eligible individual may claim on the expenses for rent paid, has been increased to Rs 60,000 per annum, the limit of which was Rs 24,000 per annum earlier.
How to Claim the Benefit
To claim tax benefits on rent paid, an individual taxpayer is required to furnish a declaration in Form 10BA that he/she satisfies all the provisions u/s 80GG of the Income Tax Act (as mentioned above).
So, any individual taxpayer staying in a rented accommodation may claim tax benefits on rent paid under the relevant section of the Income Tax Act on fulfilling its provisions.