This section has been introduced to provide relief to those individuals who do not receive any HRA but are paying rent for the stay. Thus, an individual (i.e. Deduction not available to any other taxpayer) can claim a deduction for rent paid even if he or she does not get house rent allowance (HRA).
1. Eligible Assessee
Individual assessee who
- Is not in receipt of HRA exemption u/s 10(13A) from employer, and
- Pays rent for accommodation occupied by him for residential purposes.
2. Conditions:
- The Assessee should not be receiving any HRA from his employer
- The individual has filed a declaration in Form No 10BA, confirming the details of rent paid and fulfilment of other conditions, with the return of income.
- Any expenditure incurred by him on rent of any furnished or unfurnished accommodation should exceed 10% of his total income arrived at after all deductions under Chapter VI A except section 80GG.
- The accommodation should be occupied by the assessee for the purposes of his own residence.
- The assessee or his spouse or his minor child or an HUF of which he is a member should not own any accommodation at the place where he ordinarily resides or perform duties of his office or employment or carries on his business or profession; or
- If the assessee owns any accommodation at any place other than that referred to above, such accommodation should not be in the occupation of the assessee and its annual value is not required to be determined under section 23(2)(a) or section 23(4)(a).
3. Quantum of deduction: The deduction admissible will be the least of the following:
- Actual rent paid minus 10% of the total income of the assessee before allowing the deduction, or
- 25% of such total income (arrived at after making all deductions under Chapter VI-A but before making any deduction under this section), or
- Amount calculated at Rs.5000 p.m.
4. Meaning
- HRA : HRA is the house rent allowance in income tax. It means the salary component received towards the rent payment and is allowed as a deduction from taxable salary under Section 10(13A)
ILLUSTRATION 1
Mr. Mahaveer, a businessman, whose total income (before allowing deduction under section 80GG) for A.Y.2022-23 is 4,60,000, paid house rent at 13,000 p.m. in respect of residential accommodation occupied by him at Ahmedabad. Compute the deduction allowable to him under section 80GG for A.Y.2022-23.
SOLUTION
The deduction under section 80GG will be computed as follows:
(i) Actual rent paid less 10% of total income
1,56,000 (-) (10% x4,90,000)
=1,07,000
(ii) 25% of total income
25% ×4,90,000
= 1,22,500
(iii) Amount calculated at 5,000 p.m. = 60.000
Deduction allowable u/s 80GG [least of (i), (ii) and (iii)] = 60,000
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