Don't have HRA? This tax hack could save you thousands
What's the story
Indian residents who do not receive House Rent Allowance can claim deductions for rent paid under Section 80GG of the Income Tax Act.
This is particularly advantageous for self-employed individuals and salaried employees who do not have House Rent Allowance as part of their salary structure.
By claiming this deduction, you can reduce your taxable income and ultimately lower your tax liability.
Eligibility
Eligibility criteria explained
To qualify for Section 80GG deductions, you should be a self-employed individual or a salaried employee who does not receive HRA.
Plus, you, your spouse, or your minor child must not own a residential property in the place where you reside or carry out your work.
Even if you possess a property somewhere else, you can't claim it as a self-occupied property.
Calculation
Calculation of deduction amount
The deductible amount under Section 80GG is determined by whichever of the following three conditions is the least:
₹5,000 per month
25% of the adjusted total income (total income before allowing deduction under this section)
Excess rent paid over 10% of total income
It's important to accurately calculate these amounts to claim the maximum possible deduction.
Documentation
Documentation and filing process
In order to claim this deduction, taxpayers are required to fill out Form 10BA with specific information about the payment of rent.
This form entails details like the name and address of the landlord(s), the amount of rent paid, and the period of tenancy, etc.
You should hold onto all of your rent receipts as evidence just in case any questions are raised by the Income Tax Department.
Maximizing benefit
Tips for maximizing deduction benefit
One way to ensure you claim the maximum deduction under Section 80GG is by keeping a meticulous record and evidence of all your rent payments throughout the financial year.
Plus, it's a good idea to estimate your anticipated deduction at the start of each financial year. This way, you can strategically plan your finances and make informed decisions about your rental budget.