With Tax Season on many of us would be calculating our tax liability & one of the deductions available is on rent in the form of HRA
Most of us are aware of the Deduction available with respect to the HRA,
Section 10(13A): House Rent Allowance
You can take advantage of the provisions under this section if you are renting an accommodation. These provisions will not be available to you if you stay in a rent-free accommodation or live with your family or in your own house.
Under Section 10(13A), HRA is exempt to the least of the following:
i) 50/or 40 per cent of basic salary= Dearness Allowance (if, applicable),
ii) Excess of rent paid over 10 per cent of basic salary; and
iii) Actual HRA received.
Now you have changed Jobs and the new company has a policy where they do not have a HRA deduction component in your salary structure making “Actual HRA received “ zero which means that though you may be paying rent you will not be eligible for the HRA deduction.
Recently one of our clients Mr. A Vasani came to us we suggested him to claim deduction under section 80 GG
Section 80GG – Deduction for rents paid.
Conditions for application of Section 80GG
1. The Assessee shall not be in receipt of any House Rent Allowance (Income) Income.
2. The Assessee shall be residing in a rental accommodation.
3. Such rental expenditure shall exceed 10% of the Net Total Income but before considering these expenses.
4. The Assessee shall not hold any residential property on his own name
5. The Assessee or Spouse or any children of the Assessee and in case of Assessee being a member of the Hindu Undivided Family (HUF) ay member of such HUF shall not hold any residential property in the place where the Assessee normally conducts his income earning activity.
This basically means the Assessee to have only one residential accommodation and that too only on rental basis.
The Family members can have property at places other than the place where the Assessee normally conducts the Income earning activity.
Deduction:
If the above conditions are fulfilled then, such amount of expenses exceeding 10 % of the Net Total Income shall be allowed as deduction from the Total Income
However, such an excess shall not exceed Rs. 2000 /- per month or 25 % of the Total Income.\
So if Mr. A Vasani is paying only Rs.12000 as rent per month he will be eligible only for Rs.2000 per month since there is a cap,
Meaning a maximum deduction will be 2000 x 12 = 24000 rupees per year.
If you belong to the highest Tax Slab you save more than 8000 rupees
So no worries if your company does not give HRA you have got section 80 GG for you.
This article is contributed by Suraj Trpathi & the inspiration is Mr.Anand Vasani
