prpri Budget 2016 impact on deduction for rent paid (Section 80GG) Budget 2016 impact on deduction for rent paid (Section 80GG)

In order to provide relief to the individual tax payers, it is proposed to amend section 80GG so as to increase the maximum limit of deduction from existing Rs. 2000 per month to Rs. 5000 per month.

This section allows an individual a deduction in respect of house rent paid for his own residence. Such deduction is permissible, subject to the following conditions:

a) The individual has not been into any receipt of house rent allowance from his employer exempt u/s 10(13A).

b) The individual files a declaration in Form 10BA.

c) The employee does not own :

i. any residential accommodation himself or by his spouse or where such individual is a member of a HUF.

ii. Any residential accommodation in the occupation of the Individual, the value of which is to be determined u/s 23

d) Entitlement of deduction:

i. Allowed deduction in respect of rent paid in excess of 10% of total income;

ii. Subject to a ceiling limit of 25% of total income, or , Rs.2000/- per month whichever is less. This limit of Rs.2000/- is now proposed to be increased to Rs.5000/- per month from 1st April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years.

(Author Anubhav Jain is a Executive- Direct Tax at Sudit K. Parekh & Co.)

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August 2021