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|
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.|
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.|
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.
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