The answer is YES, provided you are “not living” in your own house. In other words, if you are working in “one city” and living there in a rented house, and your own house is located in “another city” and that could be occupied by your parents or rented out.

But the answer is NO if you are living in a different house in the same city and have your own house in the same city too. In other cases, where the taxpayer is living in his or her own house or, if one does not pay rent for one’s accommodation, then the HRA is fully taxable (i.e., the individual cannot claim the HRA exemption according to Section 10(13A) of the Income-tax Act.

Special Case:

1) If you are staying with your parents, then you can claim HRA exemption by showing that you pay rent to them. In such a scenario, make sure you have proper documents like rental agreement, rental receipts, records of rent-paid transactions.

2) Even rent paid to his or her spouse can be claimed under HRA exemption provided there is documentation to prove that the arrangement is genuine.

“What if your employer is not providing house rent allowance?”

If you are making payments towards rent for residential accommodation but you do not get HRA from your employer then you can still claim the deduction under Section 80GG of the Income Tax Act.

But there are conditions for claiming Section 80GG in the tax return:

1) You are self-employed/freelancer or salaried.

2) You have not received HRA at any time during the year for which you are claiming 80GG HRA. In other words, the HRA component should not form part of your salary to claim Section 80GG.

3) The taxpayer or spouse or minor child should not own a house property.

4) You should give a declaration in Form 10BA that the taxpayer has taken a residence on rent in the previous year and has no other residence.

How are Deductions Under Section 80GG Calculated?

As per Section 10(13A), the least of the following would be considered as deduction amount under Section 80GG:

1) Rs.5000 per month or Rs.60000 a year.

2) The yearly rent amount minus 10% of the taxpayer’s adjusted total income.

3) 25% of the adjusted total income for a year.

Form 10BA

As already mentioned under the conditions for claiming Section 80GG, the taxpayer has to file Form 10BA to claim deduction under Section 80GG. Form 10BA can be filed online by logging on to the Income Tax E-Filing website. In Form 10BA, the taxpayer must declare the amount of rent paid and the name of the landlord. It is advisable to submit Form 10BA before filing the ITR and claiming deduction under section 80GG.

However, we can set the salary structure. Some employers provide the option to do so, so speak with your employer.

*****

The author is a tax consultant and can be reached at 9886319171 for ITR/GST filing.

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4 Comments

  1. Vinod says:

    hi,

    I am staying in my parent house, i am paying rent to them .. (parent is filing ITR).

    now i am planning to take a COMPOSIT LOAN (buy a Plot & construct home) in same city.

    Bank is assuring they will provide the letter for Home loan exemption to claim

    my Plan is not to move to NEW House, keep it as a spare home…(even not renting out).

    In this case can i claim the tax benefit on EMI paid & HRA.

    1. Sharath T Thomas says:

      As per the rule, you cannot claim both a home loan and HRA in the same city.

      But, practically, some people do claim up to the 1 lakh limit. You can claim HRA but allowing it as a deduction by the income tax department is a question.

      Note:
      1) However, if you have a home loan running but the home is still UNDER CONSTRUCTION, and during that period if you are staying in a rented house? – IN THIS CASE, you can claim the HRA.

      2) And whatever interest is paid between the date of sanction to date of completion (called pre-construction period interest), you can claim it in 5 equal installments after completion.

  2. John Smith says:

    Can both HRA and Home loan benefits be claimed if the individual is living in both houses? i.e. The main house is owned by parents and rent is duly paid to them, while the apartment on loan is the adjacent apartment, which is now merged/joined with the main house. So basically both houses are being used to stay.

    1. Sharath T Thomas says:

      You can claim the HRA deduction and the tax benefit on a home loan even when you are living in the same city in which your home is, BASED on two CONDITIONS – either your house is under construction, or you are living in a rented house and have rented your own house.

      In my opinion, you cannot claim, in your case.

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