House Rent Deduction in Income tax

House is one of the basic needs of any individual. Thus, the Government of India has made an allocation for deduction of rent paid by an individual for a house that he/she is living in.

Here we will understand the various aspects that apply to house rent deduction for individuals (salaries or businessmen).

The house rent deduction in income tax is known as HRA (house rent allowance) under Section 10-13A or Section 80GG of Income Tax Act. 

House rent deduction in Income Tax for non-Salaried individuals

·         Self-employed individuals can claim deductions under Section 80GG as they do not get salaries or HRA from employers.

·         Conditions of Section 80GG for any individual:

o   Can be claimed by employees who do not get HRA in salary from employers or by self employed individual (HUF or individuals).

o   Can be claimed by both only if they have not gotten any exemptions under Section 10-13A,

o   Can be claimed only if the individual does not claim any tax benefits on self-occupied property, which is owned elsewhere,

o   Should be able to furnish self-declaration (by using form 10-BA) in which he/she will have to show that all the conditions are satisfied.

·         Actual Tax Exemption (whichever is lower):

·         The tax exemption can be claimed more than 10% of the income/salary of individual and maximum limit of exemptions is 25% of income/salary

·         INR 5000/-

·         25% of total adjusted income (adjusted income= Gross total annual income- long term capital gain- short term capital gain – exemption claimed under Section 80, except under Section 80GG)

House rent deduction in Income Tax for Salaried Individual

·         Under section 10-13A, the lowest of the following amounts is allowed as tax exemption for a salaried individual (salary may include basic salary, allowance and commissions):

o   HRA given by employers,

o   Maximum 50% of salary if in metro cities, otherwise 40% of basic salary,

o   Actual rent that is paid by the employee for a rented residence minus 10% of basic salary.

·         When rent amount exceeds INR 1lakh:

o   The individual can claim HRA tax exemptions when he/she furnishes the PAN details of owner and the rent receipts.

·         Tax benefits on Home Loan and Rented Residence

o   If a house owned by employee is rented out to someone else and the employee is living in rented space, then the individual can claim benefits of both the home loan and rent allowance. It this case the individual will have to denote his income earned from the rental and pay the due tax on it.

o   The condition for above benefits requires the owned property to be far from the job location (owned property in same city is not eligible for tax benefits).

·         Tax exemption when employer refuses to provide the deductions benefits:

o   Tax exemptions can be claimed by an individual in the Income Tax Return filed.

o   The exemption amount can be received as refund of excess TDS.

·         Tax exemption when more than 1 member of family pays rent:

o   In this case, if there are more than one receipt of rent then tax exemption can be claimed on the receipts, otherwise only 1 individual can claim the tax benefits.

Documents required for House Rent deduction in Income tax

·         PAN card details of owner of property (in case the rent exceeds INR 1lakh),

·         Receipts of rent paid with following details:

o   Date,

o   Name of property owner,

o   Name of tenant,

o   PAN card details of owner,

o   Address of rented residence,

o   Duration of stay,

o   Revenue stamp with landlord’s signature on it,

o   Receipt can be made for maximum 3 months, so at least 4 rent receipts have to be furnished,

o   Xerox of rent agreement.

Last Date for filing ITR and availing House Rent Deduction in Income Tax

·         For salaried person:

o   The last date of filing ITR and claiming HRA benefits is July 31^st of the financial year.

·         For non-salaried/self-employed individual:

o   July 31^st if the income of individual is does not require Auditing,

o   September 30^th if the income is to be Audited.   

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