Non-Salaried Individuals Eligible for House Rent Allowance Under ITR Filing

Tax Relief for Non-Salaried Individuals: Claiming Deduction under Section 80GG

Non-salaried individuals, including self-employed professionals, freelancers, and business owners, can claim tax relief on rent paid under Section 80GG of the Income Tax Act. This provision is available to individuals who do not receive House Rent Allowance (HRA) as part of their salary package. However, it is essential to opt for the old tax regime to claim the deduction.

To be eligible for the deduction, an individual must satisfy the following conditions:

• They have not earned House Rent Allowance
• They pay rent for residential accommodation
• They, their spouse, minor child, or HUF do not own a residential house in the city where they reside or work
• They file Form 10BA along with the tax return

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The key difference between Section 80GG and HRA exemption available to salaried employees lies in the monetary limits. While HRA exemption is linked to salary levels and the quantum of exemption depends on the value of the HRA received, rent paid, city, or place of living, Section 80GG operates with a significantly lower statutory limit of Rs 60,000 per annum.

Section 80GG Formula

The deduction under Section 80GG is calculated as the lowest of the following:

• Rs 5,000 per month or Rs 60,000 per year
• 25 percent of the total income before allowing deduction under this section
• Actual rent less 10 percent of income before allowing deduction under this section

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To claim the deduction, taxpayers must maintain adequate documentary evidence, including:

• Rent agreement/lease deed
• Rent receipts
• Bank transfer or payment proof
• Landlord PAN where annual rent exceeds Rs 1 lakh
• Filing of Form 10BA is mandatory for claiming deduction. The form contains a declaration confirming satisfaction of prescribed conditions and is required to be filed online before or along with the income-tax return

Common Mistakes Taxpayers Make While Claiming Deduction under Section 80GG

Some common mistakes that taxpayers make while claiming deduction under Section 80GG include:

• Failing to file Form 10BA, which is a mandatory declaration for claiming deduction u/s 80GG
• Incorrect computation of deduction, claiming the entire rent paid instead of restricting the deduction
• Not properly computing "adjusted total income" and instead applying the limits on gross income
• Claiming deduction without maintaining adequate documentary evidence
• Cash rent payments without supporting documentation may attract scrutiny

Tax experts advise individuals to ensure that eligibility conditions are satisfied before claiming deduction, compute the eligible deduction correctly, and file Form 10BA timely. It is also essential to retain complete rent-related documentation along with proof for payment of rents.