If you are not receiving house rent allowance from your employer or your salary does not include house rent allowance then you are eligible to claim tax deduction for your house rent expense that you incurred for your living during the previous year.
Under section 80GG of income tax act, 1961, a self employed person, businessman and even a salaried person can claim tax deduction for the expenses that they incur towards there house rent.
Limit of Tax Deduction for House Rent paid – Section 80GG
Tax deduction under section 80GG of income tax act, 1961 is allowed to the extent of the least of following;
- Rent paid in excess of 10% of total income
- 25% of total income
- 2, 000 rupees per month (Budget 2016-17 proposed to increase this limit to Rs 5000)
For the calculation of deduction for house rent, total income will be calculated after reducing your tax deduction under different section of chapter VIA except section 80GG, long term and short term capital gain.
If finance bill of Budget 2016-17 passed then you can claim deduction of Rs 60000 under section 80GG for the rent paid instead of earlier limit of Rs 24000.
Conditions to claim deduction under section 80GG for house rent
To claim deduction under section 80GG of income tax act, 1961 you need to fulfill following conditions;
- You should not own a house in the place in which you live, or work or carry on business
- Your spouse, child including minor child, Hindu undivided family should not own any residential accommodation in that place
- You must file a declaration in form no 10BA by confirming that you paid the rent and fulfill the conditions to claim deduction.
- If you are a salary person then you should not be in receipt of house rent allowance
- You must reside in that house to claim exemption. Any one with you can also stay with you for the purpose of claiming this deduction under section 80GG.
If you are owning a house in some other city and use that house for your own resident and not given for rent then you can not claim deduction under section 80GG even though you stay in a rented house and pay rent at your work location in a different city.
Any one living in a rented accommodation can claim a maximum deduction of Rs. 24000 (2000*12) if he is not in receipt of house rent allowance and does not own any house at the place of living.