February 22 , 2013
Are you an individual staying on rent but not getting HRA and consequently tax benefits associated with it? There is a breather for you in the Income Tax laws. You can still claim tax deduction on rent paid subject to certain simple conditions.
Section 80GG provision for rent paid
Any HUF or individual can claim deduction on house rent paid if he, his spouse or minor child does not own a house in the same place. Section 80GG provides this deduction on house rent paid.
In order to be eligible you need to satisfy the conditions that 1. You are paying rent for an accommodation where you ordinarily reside, 2. You do not receive any allowance for housing rent, 3. Neither you, your spouse nor minor child owns a house in the place where you are staying on rent, and 4. Rent should be more than 10% of your total income.
There are a few more things to remember. If you, your spouse or minor child own a house in a place away from where you are residing on rent, you should not have been claiming special concession allowed for computing its annual value as nil or the house should have been actually let out. The house where you are staying in on rent should be within limits of a municipal body.
Maximum tax deduction on rent u/s 80GG
The maximum amount you can claim as deduction on house rent is the minimum of 1. Actual rent paid minus 10% of total income, 2. 25% of your total income and 3. Rs 2,000 per month. Thus maximum possible deduction on house rent under section 80GG is capped at Rs 2,000 - peanuts in comparison with your actual rent in most likelihood!
For this section, total income would be your income after making other deductions like 80C, 80D etc under chapter VI A. Total income would also not include your long term capital gains, if any.
Claiming deduction on house rent
If you wish to claim deduction for house rent you need to claim it while filing Income Tax Returns in the cell for section 80GG. Preferably pay the rent through crossed cheque. Form 10BA can be filled for this purpose to declare your rent amount and that you own no other house as per conditions above. You might have to submit it to your employer. But no forms need to be attached to your ITR form.
If you are in the lowest tax slab you can save Rs 2,400 a year by claiming this deduction. If you fall under higher brackets your savings is a couple of thousands more. Though this might rather be branded a namesake deduction you might not want to let go off it since claiming it is not very tedious. You decide!