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Words of Wisdom : "A budget tells us what we can't afford, but it doesn't keep us from buying it." ~ William Feather

Get tax exemption on rent even if you don't get HRA

Most people are aware that they are eligible to claim tax exemption on House Rent Allowance (HRA) received by them. 

In fact, sometime back I had even blogged about 'How to calculate your HRA tax benefit'.

However, what happens if you are staying in a rented accommodation, but your salary does not include any house rent allowance or you are a self-employed person?

Good news! Income Tax Act has provided some relief for such tax payers too.

Under Sec 80GG, you can claim some deduction for the rent paid, provided
- you do not get any allowance from your employer specifically towards payment of house rent
- you, your spouse or your minor child do not own any residential property at your place of business or employment
- you should also not own a 'self-occupied' house in any other place.

The deduction that you can claim would be minimum of the following:
a) Rent paid minus 10% of the total taxable income
b) 25% of the total taxable income
c) Rs.2000 per month

To claim this deduction, you have to furnish Form 10BA.

Of course, in present day context this maximum exemption limit of Rs.2000, fixed many years ago, is quite negligible. This and many such limits have not kept pace with inflation and hence have lost their intended purpose. 

Since the IT Act has become unwieldy, small tinkering here and there is not the right approach. Complete overhaul and extensive simplification is required. The intentions of the Govt,. seemed good when it came out with a new and simple Draft Direct Tax Code. Unfortunately, despite being in the pipeline for 4-5 years, it is yet to see the light of day. Moreover, during this period, the draft itself has undergone many changes and has become almost as complicated as the Act it proposes to replace (allegedly under the influence of certain vested interests, who would like to keep things as complicated as possible.)

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