Income tax return filing: No HRA? You can still claim tax benefits on rent paid

ITR filing 2023-24: Section 80GG allows self-employed tax-payers or individuals who do not receive HRA to claim tax benefits on rent paid

Most employers pay house rent allowance (HRA) to their employees’ as part of their cost-to-company (CTC) structure.

This amount is exempt from tax under section 10(13A), subject to certain criteria. That is, your tax-exempt HRA will be the lower of:

-          50 percent (40 percent if you live in a non-metro city) of your basic salary plus dearness allowance, if any.

-          The actual HRA

-          The actual rent paid minus 10 percent of your basic salary and dearness allowance

But, what if your employer does not offer HRA at all? Or, if you are a self-employed professional who does not have the luxury of claiming this HRA exemption? For such tax-payers, too, income tax rules offer relief through section 80GG. You can avail of the deduction under Section 80GG at the time of filing your income tax returns.

Also read: Moneycontrol's income tax calculator 

What is Section 80GG?

This section allows you to avail of tax breaks on the rent paid towards your accommodation during the financial year.

This deduction will be the lower of:

-          Rs 5,000 a month (Rs 60,000 a year)

-          25 percent of your total income

-          Actual rent paid minus 10 percent of your total income

Here, ‘total income’ excludes long-term capital gains (LTCG) and short-term capital gains (STCG) under section 111A and income under section 115A or 115D.

However, you will not qualify for this concession if your spouse, minor child or your Hindu Undivided Family (HUF) - in case you are part of one - owns a house in the place where you usually stay or carry out business activities.

Also, this tax exemption, like in the case of HRA, is available only under the old, with-exemptions tax regime and not the new, minimal exemptions regime.

Also read: ITR filing, HRA and Section 80GG: How to claim tax benefits on rent paid

The process for claiming this deduction

You can claim this tax deduction at the time of filing income tax returns. While you needn’t attach proofs such as rent agreement or rent receipts, you would do well to preserve these documents carefully should queries from the I-T department arise in future.

You have to enter all the details in your ITR form, in addition to filing a separate form 10BA, which seeks certain key information regarding your rental agreement and transactions. In form 10BA, you will have to mention your name, quote PAN or Aadhaar, address of the place of accommodation, rent period as also name, PAN and complete address of your landlords – the owners of the property.

While any rent paid to spouse or children will not qualify for deduction under this section, you can pay rent to your parents and claim the tax sops. However, it is important that their income tax return reflects the rent you pay as their income for the  year.