In the post-covid era, freelancing has grown largely as a career choice. Many of us are even running small businesses, working as contractual employees or have a professional income. For any career prospect, we often consider moving to cities with higher opportunities and hence, we need to stay in a rented accommodation.
While salaried employees benefit from House Rent Allowance (HRA), self-employed individuals and those without HRA can also claim tax deductions under Section 80GG of the Income Tax Act for rent paid on furnished or unfurnished accommodation.
What are the specific conditions to claim this deduction?
The below conditions are required to be fulfilled in order to be able to claim a deduction u/s 80GG.
- You must have not received HRA from your employer at any time during the year.
- You, your spouse, minor child or HUF of which you are a member, should not own any residential property where you currently reside and follow your occupation. For example, if you own a house in Delhi but choose to stay in a rented house in the same city, you can’t claim the deduction under section 80GG.
- You shouldn’t have a residential property at any other place, that you are declaring as a self-occupied property.
How is the deduction calculated?
The amount of deduction allowed will be the least of,
- Total rent paid less 10% of total income
- 25% of the total income
- ₹5,000 per month i.e ₹60,000 annually
Also, it is important to note that, ‘total income’ for this section means ‘Gross total income less all deductions under chapter VI-A (except 80GG).’
Note: Deduction under section 80GG of Income Tax Act cannot be claimed against short-term capital gains u/s 111A, long-term capital gains and income chargeable to tax at special rates.
What is Form 10BA?
Form 10BA is a declaration that has to be filed by an individual who wants to claim a deduction under section 80GG for rent paid.
It is a declaration that you are not claiming the benefit of a self-occupied property on a house in any other location or the same location as you are employed.
You will be required to fill in details like your name, PAN and address along with the rent details.
If you receive HRA as a part of your salary, the below topic is for you!
Reply to this thread if you have any questions and we’ll be happy to answer them.