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If you live in a rented house but don’t get House Rent Allowance (HRA) in your salary, there is no need to worry. Under Section 80GG of the Income Tax Act, you can still claim tax exemption on rent payments. This scheme is designed primarily for salaried individuals and self-employed individuals who do not receive an HRA. However, there are certain conditions that must be met in order to receive this benefit. Discounts are determined based on your annual income and mortgage payments.
How to benefit from Section 80GG?
The first condition for claiming tax exemption under Section 80GG is that no HRA should be included in your salary. If you receive HRA as part of your salary, you are not eligible for this exemption. The second condition is that the tenant you are renting must have their own place of residence. This exemption does not apply to other office or commercial establishments. In addition, you, your spouse, or your minor children must not own any property in the city where you live or work.
You must also complete a mandatory Form 10BA in order to claim this exemption. You have to submit this form to the income tax portal, where you have to declare that you meet all the requirements of section 80GG. To avoid any problems in the tax process, it is important to ensure that the information provided on the form is accurate.
How much exemption can you claim?
Under Section 80GG, you can claim the lowest of the following amounts as tax exemption:
Rs 5,000 per month (up to Rs 60,000 per year)
25 per cent of your Adjusted Gross Income (AGI)
Annual rent paid minus 10 per cent of your AGI
Key points to remember:
The maximum exemption limit is Rs 60,000 annually.
Keep supporting documents like rent receipts, rental agreements, and bank statements.
Ensure that Form 10BA is filled out correctly and include this deduction while filing your tax returns.
In summary, even without receiving HRA, you can save on taxes through rent payments by understanding the rules under Section 80GG and improving your tax planning.
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