Can Self-Employed People Claim HRA?
Oct 03, 2018 Legal Guidance
No matter how calculative we are, income tax calculation is a challenge for most of us. Most of us look for simple tips on how we can save on tax. People when they move to a bigger city, accommodation is the first challenge. Owning a house is a far fetch question for maybe a few years. So, the option is renting a home paying a right amount of rent. If anything can be saved in these lines can help renters in many aspects.
Here are a few things to know about tax benefits and reductions to meet your expenses.
Here are a few things to know about tax benefits and reductions to meet your expenses.
Tax Deduction for Self-Employed People
Most of already know that salaried employees can claim a tax exemption as per Section 10 (13A) of the Income Tax (I-T) Act provided you are entitled to house rent allowance (HRA) as part of the cost to the company components. The amount for tax exemption is calculated whichever is the lowest of the three options:
- HRA received in actuals;
- The actual amount of rent paid, deducting 10 per cent of the basic pay; or
- About 50 percent of the salary in case the employee lives in a metro city and 40 percent of your basic salary if the employee lives in a non-metro metro city.
Even self-employed people can also claim tax deductions under Section 80 GG of the Act. If any salaried person does not have a part of HRA as salary component, they can also claim tax deductions under the Section 80 GG of the Act. In this case, the tax payer needs to file Form 10BA during their income tax return (ITR) filing. The following details are required while filing ITR:
- Name of the applicant
- PAN details of the applicant
- Address for correspondence
- Residency tenure
- Amount paid as rent.
- Mode of payment
- Name and address of the landlord
- PAN details of the landlord (in case the annual rent is more than INR 1 lakh for the assessment year
A declaration needs to made stating that the applicant does not own any other residential accommodation in self, spouse's or in the name of their children.
The lowest amount that can be claimed for deduction is as follows:
The lowest amount that can be claimed for deduction is as follows:
- INR 5000;
- About 25 percent of the total income, excluding long-term or short-term capital gains; and
- The actual rent minus 10 percent of revenue.
You can claim these with certain conditions as you will have to prove that you did not receive any HRA against the amount of rent paid; and that you do not own any property in the city where you live in rented accommodation.
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