Rents Paid Deduction under Income Tax Act 1961
An individual can claim deduction under section 80GG if rents paid by him but not receiving any HRA from the employer.
Conditions for Claiming Deduction of Rent Paid :-
- The least of following is allowed as deduction:
a) Rent paid in excess of 10% of total income;
b) Rs. 2,000 per month( Increased to Rs 5000 w.e.f AY 2017-18); or
c) 25% of total income.
- The total income for working out these percentages will be computed before making any deduction under section 80GG.
- the employee has not been in receipt of any House Rent Allowance specifically granted to him which qualifies for exemption under section 10(13A) of the Act;
- the employee files the declaration in Form No.10BA. (See Note-1)
- The employee does not own:
i) any residential accommodation himself or by his spouse or minor child or where such employee is a member of a Hindu Undivided Family, by such family, at the place where he ordinarily resides or performs duties of his office or carries on his business or profession or
ii) at any other place, any residential accommodation which is in the occupation of the employee, the value of which is to be determined under section 23(2)(a) or section 23(4)(a), as the case may be
As per Income Tax Act, Section 80GG read as follow :-
In computing the total income of an assessee, not being an assessee having any income falling within clause (13A) of section 10, there shall be deducted any expenditure incurred by him in excess of ten per cent of his total income towards payment of rent (by whatever name called) in respect of any furnished or unfurnished accommodation occupied by him for the purposes of his own residence, to the extent to which such excess expenditure does not exceed two thousand rupees per month ( Increased to Rs 5000 w.e.f AY 2017-18 by Finance Act 2016) or twenty-five per cent of his total income for the year, whichever is less, and subject to such other conditions or limitations as may be prescribed ( Note-1 ), having regard to the area or place in which such accommodation is situated and other relevant considerations :
Provided that nothing in this section shall apply to an assessee in any case where any residential accommodation is—
|(i)||owned by the assessee or by his spouse or minor child or, where such assessee is a member of a Hindu undivided family, by such family at the place where he ordinarily resides or performs duties of his office or employment or carries on his business or profession; or|
|(ii)||owned by the assessee at any other place, being accommodation in the occupation of the assessee, the value of which is to be determined [under clause (a) of sub-section (2) or, as the case may be, clause (a) of sub-section (4) of section 23].|
Explanation.—In this section, the expressions “ten per cent of his total income” and “twenty-five per cent of his total income” shall mean ten per cent or twenty-five per cent, as the case may be, of the assessee’s total income before allowing deduction for any expenditure under this section.]
FORM NO. 10BA
[See rule 11B]
Declaration to be filed by the assessee claiming deduction under section 80GG
I/We ________________ ___(Name of the assessee with permanent account number) do hereby certify that during the previous year _____________________I/we had occupied the premise_________________________ (full address of the premise) for the purpose of my/our own residence for a period of months and have paid Rs._____________________ in cash/through crossed cheque, bank draft towards payment of rent to Shri/Ms/M/s_____________________________ (Name and complete address of the landlord).
It is further certified that no other residential accommodation is owned by
(a) me/my spouse/my minor child/our family (in case the assessee is HUF), at where I/we ordinarily reside/perform duties of office or employment or carry on business or profession, or
(b) me/us at any other place, being accommodation in my occupation, the value of which is to be determined u/s 23(2)(a)(i) or u/s 23(2)(b).
- Rental income from guest houses taxable under Business head
- No deduction of brokerage paid for procuring tenant
- Standard rent has to be computed as per the Rent Control Act even if same is not fixed