Difference between House Rent Allowance(HRA) & Section 80GG for Rent Paid? & their calculations as per the Income-tax Act:

An assessee who stays in a rented house can reduce tax liability by claiming exemption on HRA or deduction u/s 80GG. Let us understand the terms

What is the House Rent Allowance (HRA)?

House Rent Allowance is a special allowance specifically granted to an employee by his employer as a part of the salary package as per terms & conditions of employment towards the payment of rent for the residence of the employee. Exemption on HRA is available under section 10(13A).

What is section 80GG? How to calculate deduction u/s 80GG?

Section 80GG provides deduction in respect of rent paid by an assessee for an accommodation occupied for residential purpose, who is not in receipt of HRA qualifying for exemption u/s 10(13A)

Some distinguish point between HRA exemption & deduction u/s 80GG are a follows:

HRA Exemption  Deduction u/s 80GG
1)Eligible Person

A salaried person who incurs house rent expense, If he is receiving HRA from an employer or getting salary inclusive of HRA eligible for exemption on HRA.

A self-employed person, businessman, and even a salaried person (not receiving HRA from employer) incurring house rent expenses eligible for deduction u/s 80GG.  
2) Computation

The exemption granted to the least of the following:

1. HRA actually received for the relevant period

2. Rent paid (-) 10% of salary* for the relevant period

3. 50% of salary*(in metro cities i.e. Mumbai, Chennai, Delhi, Kolkata) otherwise 40% of salary* for the relevant period.

Deduction allowable is least of the following:

1. Actual rent paid (-) 10% of AGTI*

2. 25% of AGTI*

3. Amount Calculated at Rs. 5000 p.m.

3) It is an exemption allowable from salary income. Deduction u/s 80GG calculated on total income & reduce it from Gross total income. 

Note:

1) If a person worked in an organization for a salary with HRA for a particular period in a financial year and for the remaining period he worked in another organization for a salary without any HRA. He will get benefit u/s 10(13A) (HRA) & u/s 80GG on proportionate basis.

2) Salary for the purpose of HRA exemption means basic salary, dearness allowance, in terms of employment & commission as a fixed percentage of turnover.

3) AGTI is total income after taking all other deductions under chapter IV-A but before 80GG deduction.

If you want to know more then you can reach out at brijlavaniya@yahoo.com

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Location: Kalyan, Maharashtra, IN
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One Comment

  1. Anup Chowdhuri says:

    Dear sir
    I’ve lease accommodation provided by bank Lease amt fixed Rs.19000 pm rent.But Bank is paying only Rs. 17000 as rent directly to the owner as my eligibility and shortfall of Rs 2000 paid by me to the owner.
    My question is that can I claim Rs. 2000/-. as HRA exemption in income tax of FY i.e. 2019-2020.

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