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rent claim u/s 80 gg

N.Sivaraj (Manager _ F&A) (93 Points)

12 March 2009

dear sir, I am working in a company. For our employees we are not paying any HRA. But the employees wants to get tax benefit for the rent what they are acttually paying to their landlords.

Can we consider the rent paid by the employees for the TDS purpose. What are the points we have to consider to give this benefit to employess for TDS purpose.

pls explain.

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3 Replies

PiyushAgrawal (Chartered acooutant in practice) (575 Points)
Replied 12 March 2009

Originally posted by :N.Sivaraj
"	dear sir, I am working in a company. For our employees we are not paying any HRA. But the employees wants to get tax benefit for the rent what they are acttually paying to their landlords. Can we consider the rent paid by the employees for the TDS purpose. What are the points we have to consider to give this benefit to employess for TDS purpose. pls explain.	"

PiyushAgrawal (Chartered acooutant in practice) (575 Points)
Replied 12 March 2009

Originally posted by :N.Sivaraj
"	dear sir, I am working in a company. For our employees we are not paying any HRA. But the employees wants to get tax benefit for the rent what they are acttually paying to their landlords. Can we consider the rent paid by the employees for the TDS purpose. What are the points we have to consider to give this benefit to employess for TDS purpose. pls explain.	"

Hello....

They shud get deduction of 80gg if ::-

1) they not receive any kind of HRA

2) They have no any house property in the city where they doing service.Even than there family members(HUF) not have any kind of House property.

3)They use furnish their rent detail in form 10 BA...

Rahul Gupta (CA Final Student) (1780 Points)
Replied 12 March 2009

Who can claim deduction?

Any individual can claim the deduction u/s 80GG. Irrespective of whether you are a salaried individual, or a business person, you can claim deduction under Sec 80GG.

Of course, you need to be paying rent, and for your own accommodation.

Thus, if you are paying rent for a house where your parents live, you can not claim deduction u/s 80GG. Similarly, if you are staying in a house but your spouse is paying the rent, you can not claim any deduction.

You can claim deduction for either furnished or unfurnished accommodation.

Restrictions on claiming the deduction

There are certain restrictions in this section. You can not claim deduction u/s 80GG if:

You receive HRA from your employer (or you received HRA from your current or previous employer at any time in the year)

You or your spouse or your minor child owns a house at the place (city / town / village) where you normally stay, work or conduct business

You are a member of a Hindu Undivided Family (HUF), and the HUF owns a house at the place where you normally stay, work or conduct business

You own a house at any other place and claim concessions of self-occupied house property for it (For example, tax benefit of a home loan for the house)

Amount of deduction under section 80GG

So, how much can you claim as deductible u/s 80GG?

The amount allowed as deduction is the minimum of the following:

Rent / lease amount paid less 10% of your total income
Rs. 2,000 per month
25% of your total income

Here, Total Income means:

Your Gross Total Income

Less long term capital gain, and short term capital gain that would be charged at a concessional tax rate (like STCG from sale of shares)

Less all deductions other than the deduction under Section 80GG

Other Conditions

Form 10BA

You need to declare that you are paying the rent. This has to be done by filling up and filing from 10-BA.

City / Municipality

The deduction u/s 80GG is available only if the house is situated within specified municipal areas. However, all major cities are a part of the specified municipal areas.

Example

Let's assume the following (amounts per annum):

Basic: Rs. 4,00,000
DA: Rs. 50,000

You pay a rent of Rs. 5,000 per month.

Here, the deduction that you can claim is the minimum of:

1. Rent / lease amount paid less 10% of your total income:

(Rs. 5,000 * 12) – 10% of (Rs. 4,00,000 + Rs. 50,000)
= Rs. 60,000 – Rs. 45,000
= Rs. 15,000

2. Rs. 2,000 per month

That is, Rs. 24,000 per year.

3. 25% of your total income

25% of (Rs. 4,00,000 + Rs. 50,000)
= Rs. 1,12,500.

Thus, you would be able to claim a deduction of Rs. 15,000.