Case 1 - There are chances that House Rent Allowance(HRA) is paid by your Employer, but exemption is not provided by him due to non production of Rent Receipts.
In such case he can claim HRA exemption benefit while filing 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 Location is other than Mumbai, Delhi, Kolkata or Chennai, then 40% of 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 case, Taxpayer can claim deduction for amount of Rent paid for his accommodation U/s 80GG, if following conditions are fulfilled.
1) Taxpayer is self employed person or he/she is 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 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).
As per Income Tax Act, Maximum Deduction under section 80GG is 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.