Case 1 - There are chances that House Rent Allowance(HRA) is paid by your Employer, but the exemption is not provided by him due to the non-production of Rent Receipts.
In such a case one can claim the HRA exemption benefit while filing an Income-tax return by computing the exemption amount as follows:-
As per the Indian Income-tax Act, the HRA exemption should be calculated as the least of the following.
- Rent paid in excess of 10% of Salary
- Actual HRA received by the employee.
- 50% of Salary, if the Employment is in Mumbai, Delhi, Kolkata or Chennai. If the Location is other than Mumbai, Delhi, Kolkata or Chennai, then 40% of the Salary
Note: Salary for computing HRA means Basic Salary + Dearness Allowances + Percentage base commission if any
Case 2 - Employer has not paid House Rent Allowance(HRA) as part of Salary and Taxpayer himself is staying in Rented house.
In such a case, the Taxpayer can claim a deduction for the amount of Rent paid for his accommodation U/s 80GG, if the following conditions are fulfilled.
1) Taxpayer is a self-employed person or he/she is a salaried person but does not receive House Rent Allowance from the employer at any time during the year.
2) Taxpayer or his/her spouse or minor child should not own any residential house at the place where he resides, performs the duties of his office, or employment or carries on his business or profession
3) In case the taxpayer owns residential accommodation at a place other than the place in Pt.2 above, then he/she should not declare such House Property as self-occupied. It should be declared as Deemed Rent House Property (Declaring Fair Market Rent as Rental Income).
4) The taxpayer needs to file Form 10BA containing details of payment of rent before the filing of return.
As per the Income-tax Act, the Maximum Deduction under section 80GG is a minimum of :
- Rs 5,000 per Month,
- 25% of Total Income,
- The Excess of actual rent paid over 10% of Total Income.
Note: Total Income for this purpose means total Income minus Income from Capital Gains minus Tax Saving and other deductions.