Income Tax Return Filing, HRA benefits:For most employed people who file income tax returns, the tax exemption on House Rent Allowance (HRA) is a big relief. Often it is also the biggest tax exemption they get. But can those who do not work or whose salary break-up does not include the HRA amount also get tax exemption on their house rent? The answer to this question is yes. Such people can also claim tax exemption, but its rules and tax exemption limit are slightly different. It is possible that the tax exemption in such a case is less than the relief given to those who get the benefit of HRA. But it is still better than not getting any benefit. We will know further how those who do not get HRA can take advantage of this tax exemption. But first let us understand how those who get HRA get this benefit.
How to get tax exemption on HRA
Most employers in the organized sector give their employees House Rent Allowance (HRA), which is a part of their salary or Cost to Company (CTC). This amount is tax free under Section 10(13A) of the Income Tax Act. But some conditions also apply to this, under which tax exemption on HRA is available only on the amount which is the lowest of these three:
1. 50 per cent of basic pay (40 per cent if you live in a non-metro city) + dearness allowance.
2. Actual amount received as HRA
3. The amount left after deducting 10 per cent of your basic pay + dearness allowance from the actual rent paid.
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What should those who do not get HRA do?
Above we have explained the formula for calculating tax for those who receive HRA. But what if your employer does not give HRA or you are self-employed? Actually, Section 80GG of the Income Tax Act works to provide relief to such taxpayers. Such people can avail tax deduction under Section 80GG while filing their income tax return.
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What is Section 80GG?
Section 80GG of the Income Tax Act allows you to avail tax exemption on the amount you pay for your house rent. Tax exemption under this section will be available on the lowest of the following amounts:
– Rs 5,000 per month (Rs 60,000 per year)
– 25 percent of your total income
– Or the amount left after deducting 10 per cent of your total income from the actual rent paid.
But if your spouse, minor child or Hindu Undivided Family (HUF) owns a house at the place where you usually live or do business, then you will not be able to avail this concession. Apart from this, in the case of HRA, this tax exemption is available only under the old tax regime. This facility is not available in the new tax regime.
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How to claim tax exemption under section 80GG
You can claim tax exemption on house rent under section 80GG while filing your income tax return. For this, you do not need to provide proof like rent agreement or rent receipt in advance, but later on, you may have to provide these documents in case of inquiry from the Income Tax Department. Therefore, it will be good for you to keep them safe.
To claim this exemption, you have to enter all the details in your ITR form, as well as fill a separate Form 10BA, which asks for some important information about your rental agreement and transactions. In Form 10BA, you have to mention your name, PAN or Aadhaar number, address of the living space, rent period and your landlord’s name, PAN number and complete address.
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Although rent paid to spouse or children is not tax exempt under this section, you can claim tax exemption by paying rent to your parents. If you do this, the rent paid by you should be shown as income in the income tax return of the parents, so that there is no problem later.