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More about House Rent Allowance

House Rent Allowance

What if my employer doesn’t provide me with HRA?

If you are making payments towards rent for any furnished or unfurnished accommodation occupied by you for your own residence, but do not receive HRA from your employer, you can claim deduction under section 80GG.

Conditions that must be fulfilled to claim this deduction –

  • You are self employed or salaried
  • You have not received HRA at any time during the year for which you are claiming 80GG
  • You or your spouse or your minor child or HUF of which you are a member – do not own any residential accommodation at the place where you currently reside, perform duties of office, or employment or carry on business or profession.

In case you own any residential property at any place, for which you have income from house property under applicable sections (as a self occupied property), no deduction under section 80GG is allowed.

How to claim Section 80GG deduction?

The lowest of these will be considered as the deduction under this section –

  • Rs 2,000 per month
  • 25% of total income
  • Actual Rent less 10% of Income
    (In both the above cases, income to exclude long term capital gain, short term capital gain under section 111A and Income under section 115A or 115D and deductions 80C to 80U. Also income is before making deduction under section 80GG)

How to claim HRA when living with parents?

Samiksha works at an MNC in Bangalore. Her company provides her with house rent allowance. But she doesn’t live in a rented accomodation; she lives with her parents instead. How can she make use of this allowance?

Samiksha can pay rent to her parents and claim the allowance provided they own the place they currently live in. All she has to do is enter into a rental agreement with her parents and transfer money to them every month.

This way Samiksha can make a nice gesture and give back to her parents, and two, save some taxes.

But remember: Samiksha’s parents will have to show the rent she paid in their income tax returns. But as a family you will be saving up.

House Rent Allowance

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