Facts about Income Tax Benefits on House Rent
Jun 13, 2018 Legal Guidance
In order to meet high rented cost, employers pay HRA- House Rent Allowance to their employees. The income tax laws of our country provide benefits to those who live on rent without getting HRA. The income tax benefits on house rent paid differs on whether you pay rent and do not receive the HRA or you are a salaried person who is eligible to receive HRA from the employer.
Salaried people are eligible for tax exemption under Section 10 (13A) of the Income Tax Act for the HRA receives by them from their employees. But there are certain conditions to it – the first one being you should be actually paying rent for the accommodation you are living in. You should not be the owner or co-owner of the accommodation for which you are paying the rent.
The deducted amount of the HRA would be lowest for the following factors:
Salaried people are eligible for tax exemption under Section 10 (13A) of the Income Tax Act for the HRA receives by them from their employees. But there are certain conditions to it – the first one being you should be actually paying rent for the accommodation you are living in. You should not be the owner or co-owner of the accommodation for which you are paying the rent.
The deducted amount of the HRA would be lowest for the following factors:
- HRA actually received.
- 50 percent of the salary for employees living in metropolitan cities like Delhi, Mumbai, Kolkata or Chennai or 40 percent of the salary for employees staying in other cities.
- If the rent paid more than 10 percent of the salary.
In order to compute the deduction, the salary shall only be considered for the period for which you have paid the rent. However, if the rent paid by you does not exceed 10 percent of the salary for a relevant period then no HRA tax benefit shall be available. The salary used for above purpose includes the basic salary, dearness allowance and any fixed commission as a percentage of turnover.
Those who pay rent but do not receive HRA are also eligible for the rent paid under Section 80GG of the Income Tax Act. People who are self employed as well as who do not receive any HRA from their employers can claim the benefits. The benefit is allowed as the deduction which is restricted to 25 percent of the total income or if excess rent has been paid over 10 percent of the total income. The maximum deduction that can be claimed is Rs 5,000 per month and Rs 60,000 in a year.
Herein the deduction is not based on that period for which you rented the accommodation rather you can claim the entire deduction even you have rented the place for only one month. But if you, your spouse or minor child owns a property in the same location then you cannot claim the benefit. You also cannot claim the benefit if you are a part Hindu Undivided family (HUF) which owns a residential property in the same region where you reside in. Even if the residential property is for rent then also you cannot claim the benefit of the rent paid under section 80GG. Also, you cannot claim the deduction, if you own a property at any other place which is claimed as self occupied.
Those who pay rent but do not receive HRA are also eligible for the rent paid under Section 80GG of the Income Tax Act. People who are self employed as well as who do not receive any HRA from their employers can claim the benefits. The benefit is allowed as the deduction which is restricted to 25 percent of the total income or if excess rent has been paid over 10 percent of the total income. The maximum deduction that can be claimed is Rs 5,000 per month and Rs 60,000 in a year.
Herein the deduction is not based on that period for which you rented the accommodation rather you can claim the entire deduction even you have rented the place for only one month. But if you, your spouse or minor child owns a property in the same location then you cannot claim the benefit. You also cannot claim the benefit if you are a part Hindu Undivided family (HUF) which owns a residential property in the same region where you reside in. Even if the residential property is for rent then also you cannot claim the benefit of the rent paid under section 80GG. Also, you cannot claim the deduction, if you own a property at any other place which is claimed as self occupied.
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