No HRA? Here’s how you can still claim tax deduction under Section 80GG on rent paid

Self-employed, salaried taxpayers not entitled to HRA can claim deductions under section 80GG on rent paid

For salaried taxpayers, house rent allowance (HRA) is a highly popular tax break under the old tax regime that helps cut tax outgo substantially.

In fact, since it does not come with a cap, unlike Section 80C of the Income-tax Act which allows deductions of up to Rs 1.5 lakh, the tax break can tilt the scales in favour of the old regime, particularly for the 2024-25 financial year.

Since self-employed individuals do not draw a salary and, thus, HRA, they cannot claim tax breaks under Section 10 (13A), which allows this exemption. They can, however, avail of tax sops on rent paid under Section 80GG.

Likewise, even salaried individuals whose salaries do not include HRA component can utilise the tax concessions offered under this section.

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Know the limits

This deduction allowed under the section 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’ refers to the income before allowing deduction on any expenditure under this section.

You can claim this tax deduction at the time of filing your income tax return (ITR). The law does not require you to attach documentary proof such as rent agreement or rent receipts, but it is in your interests to preserve these documents carefully should queries from the income tax department arise later.

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Understand the process, eligibility

You have to enter all the details in the specified 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 the owner(s) 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 sop. However, it is important that their ITR reflects the rent you pay in their income for the year. If you are a member of a Hindu undivided family (HUF) that owns the premises from which you operate your business, you will not be eligible for a deduction under this section.