Generally with the term HRA or house rent allowance people mostly understand that only salaried people are eligible to get HRA benefit. In other term, get income tax exemption for the rent paid by them. But here the question is, what will happen to people who are doing business or earning money from non-salaried sources and staying in rented accommodation?
In this article, I will be talking on this topic & share how to claim house rent allowance or HRA benefit even if you are not getting house rent allowance, by Section 80GG of income tax act.
What is Section 80GG?
As I have already mentioned above, it is very simple that for a salaried people one can easily claim HRA benefit through their employer and enjoy tax benefit on rent paid. For those people, section 80GG benefit is not applicable. If you are salaried and you have HRA benefit, then you can claim through your employer under section 10(13A).
In other way, people who doesn’t get any sort of HRA benefit or any tax exemption for paying rent can enjoy the benefit of section 80GG, under which one can get some tax benefit up to a certain limit.
Rules of getting HRA benefit on rent paid as per section 80GG
Generally one have to declare the rent paid under section 80GG during filing income tax return only, at the end of financial year. And to get the benefits you have to follow the conditions below.
- Section 80GG for HRA for business man or non-salaried person, mainly for them who are not getting employer provided HRA benefits.
- The exemption limit is lowest of these 3 : Rs 5000/ month rent [Rs 60,00 rent annually] / Rent paid minus 10% of total income / 25% of your income.
- This benefit is only applicable for individual or HUF.
- You or your spouse or your minor child or HUF of which you are a member – do not own any residential accommodation at the place where you currently reside and claiming HRA benefit. In case you own a house on the same city, for which you are enjoying income tax exemption of housing loan or enjoy rental income already, then section 80GG will not be applied in your case.
How To Claim Your HRA under section 80GG
The process of claiming HRA under section 80GG is very simple. You have to file Form 10BA with details of payment of rent. You can download the form Form 10BA online from Income tax India website. After that while claiming your Income tax return, you have to mention details and submit the form.
Example of HRA Claim under Section 80GG
Let’s consider Sharma Ji has total taxable income of Rs 5 lakh after availing all deductions. Obviously he is a business man as we are explaining the HRA calculation under section 80GG. Sharmaji is paying an annual rent of Rs 1,20,000 [Rs 10,000/month]. Now let’s calculate house rent allowance as per Section 80GG.
At INR 5,000 per month = INR 60,000 Yearly
Rent paid minus 10% of total income = INR 1,20,000 – INR 50,000 = INR 70,000
25% of total income = INR 1,25,000
So, it’s clear that out these 3 amount Rs 60,000 is the lowest. That means Sharmaji can further get Rs 60,000 as HRA deduction benefit from his taxable income of Rs 5 lakh. After getting the HRA benefit hie new taxable income will be Rs 4,40,000.
Final Take on Section 80GG To Claim HRA
Hope this explanation is quite simple to understand your problem of understanding how to claim tax on paying rent, in case you are not getting HRA benefit. There might be various complex scenarios or cases, but I have shared the simple and straight forward example to share my understanding of this topic. You should always consult with CA or certified finance planner to get proper clarification. Thanks for reading this article, you can share the same in Facebook, if you find it useful.