When it comes to tax deductions for individuals living in rented accommodation, there is good news for both salaried and non-salaried individuals. While salaried taxpayers can claim House Rent Allowance (HRA) exemption, non-salaried individuals also have a provision that provides tax relief. Let's explore the details of this provision and the conditions to be fulfilled.
Under Section 80GG of the Income Tax Act, individuals who do not own residential accommodation where they conduct their office duties, employment, business, or profession can claim tax relief for the rent paid. This provision applies to the taxpayer, their spouse, minor child, or Hindu Undivided Family (HUF) if the taxpayer is a member. To avail this relief, the taxpayer needs to file Form 10BA, which includes details of the rent payment.
The amount of deduction allowed depends on certain factors. The deduction is limited to the lower of Rs 5,000 per month, 25% of the total income, or the actual rent paid exceeding 10% of the total income.
To be eligible for this deduction, individuals must not own any residential property, and their spouse, minor child, or HUF should not own any residential accommodation where the taxpayer ordinarily resides. Taxpayers need to file a declaration in Form 10BA to validate their eligibility.
It is important to note that the deduction for House Rent Allowance (HRA) and the deduction under Section 80GG are mutually exclusive. This means that taxpayers can only claim one of these deductions, depending on their circumstances.
In conclusion, individuals who are not eligible for HRA, including non-salaried individuals such as self-employed individuals and salaried employees not receiving HRA, can benefit from tax relief on rent paid through Section 80GG. By fulfilling the specified conditions and filing the necessary documentation, eligible taxpayers can avail of the deduction, providing them with financial relief.
The author is a Chartered Accountant with 2 decades of experience into Accounting, Taxation, Auditing, Risk & Compliance, Credit Controls, Due diligence. Currently, the author is the founder and managing partner at RRL Global services.
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