Enjoy Tax Benefits for the Rent You Pay
Aug 14, 2017 Legal Guidance
Whether you are a salaried person or self employed, there are certain tax benefits that you can enjoy if you pay the rent. The law allows the individual to deduct the tax for the rent being paid.
We discuss the provisions for the same:
Tax benefit for the self employed person:
A self employed person can claim tax as an expenditure if the premise or the office used to carry out business is rented by him. Even if the premises used to carry out the business is a residential place, the rent paid can be claimed as expenditure. If you do some renovation or pay municipal taxes for the property, then you can claim it as expenditure as well.
If your accounts are required to be audited because the turnover exceeds Rs 1 crore per year for the business or Rs 50 lacs for the profession you carry out, you have to deduct tax at the source at the rate of 10 percent for such rent, if you pay more than Rs 1.80 lacs per year as tax for the rental.
Tax benefit for the person who receives HRA:
If your employer pays you HRA and you have the receipt for the same, then you can claim the rent paid for the exemption. Though there are certain limits for the same:
To claim the HRA you need to pay rent for the property you are being paid HRA for. You cannot ask for tax exemption for the property your parents are living. You have to live in the property you are asking the HRA for. Also, the accommodation you are asking the rental exemption for should not be owned by you.
This is done to cover the cases where the employee lets out his property to the employer and the employer, in turn, lets it to the employee. The employer gets the full deduction with respect to the rent paid to the employee. The employee gets 30 percent HRA while claiming 30 percent flat deduction on such rent received by him for his own property. It reduces the tax liability effectively.
The HRA you receive is not fully tax exempt. You can claim HRA exemption on three terms:
The value of HRA received by you
The amount of rent paid by you if it exceeds 10 percent of your salary
50 percent of basic salary if you live in one of the metro cities, 40 percent if you live in any other city.
Tax benefit for the people who do not have HRA receipt or are self employed:
Section 80GG provides tax relief for the people who do not receive the HRA from their employer or the ones who are self employed and pay the rent for the residential property they occupy. The tax benefit is the form of a deduction from taxable income. The deduction available in such case is Rs 5000 per month, subject to a maximum of 25 percent of total taxable income. So the annual deduction available to you is Rs 60,000.
We discuss the provisions for the same:
Tax benefit for the self employed person:
A self employed person can claim tax as an expenditure if the premise or the office used to carry out business is rented by him. Even if the premises used to carry out the business is a residential place, the rent paid can be claimed as expenditure. If you do some renovation or pay municipal taxes for the property, then you can claim it as expenditure as well.
If your accounts are required to be audited because the turnover exceeds Rs 1 crore per year for the business or Rs 50 lacs for the profession you carry out, you have to deduct tax at the source at the rate of 10 percent for such rent, if you pay more than Rs 1.80 lacs per year as tax for the rental.
Tax benefit for the person who receives HRA:
If your employer pays you HRA and you have the receipt for the same, then you can claim the rent paid for the exemption. Though there are certain limits for the same:
To claim the HRA you need to pay rent for the property you are being paid HRA for. You cannot ask for tax exemption for the property your parents are living. You have to live in the property you are asking the HRA for. Also, the accommodation you are asking the rental exemption for should not be owned by you.
This is done to cover the cases where the employee lets out his property to the employer and the employer, in turn, lets it to the employee. The employer gets the full deduction with respect to the rent paid to the employee. The employee gets 30 percent HRA while claiming 30 percent flat deduction on such rent received by him for his own property. It reduces the tax liability effectively.
The HRA you receive is not fully tax exempt. You can claim HRA exemption on three terms:
The value of HRA received by you
The amount of rent paid by you if it exceeds 10 percent of your salary
50 percent of basic salary if you live in one of the metro cities, 40 percent if you live in any other city.
Tax benefit for the people who do not have HRA receipt or are self employed:
Section 80GG provides tax relief for the people who do not receive the HRA from their employer or the ones who are self employed and pay the rent for the residential property they occupy. The tax benefit is the form of a deduction from taxable income. The deduction available in such case is Rs 5000 per month, subject to a maximum of 25 percent of total taxable income. So the annual deduction available to you is Rs 60,000.
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