Taxation: Kuldip Kumar

I am self-employed. Since I don't get HRA, how can I claim tax exemption on the rent I pay for my house?

Yes, Section 80GG of the Income Tax Act, 1961 provides relief to individuals like you, although this may seem tiny. Where an individual is not in receipt of HRA such individual can avail deduction up to maximum of Rs 2,000 per month in respect of rent paid for the accommodation occupied by the individual for his own residence. Section 80GG allows the deduction for an amount which is lower of (a) actual rent paid in excess of 10 per cent of total income or (b) Rs 2,000 per month or (c) 25 per cent of total income for the relevant financial year, which ever is lower. For example, you pay a monthly rent of Rs 10,000 towards your accommodation and your total income during the financial year is Rs 10 lakh. In such a scenario, deduction allowed shall be computed at lower of (a) Rs 20,000 (excess of actual rent paid over 10 per cent of total income (Rs 1,20,000-Rs 1,00,000)), (b) Rs 24,000 (Rs 2,000 per month), (c) Rs 25,000 (25 per cent of total income). Hence, a deduction in the example given would be Rs 20,000 against the rent paid of Rs 1,20,000.

It is also important that for claiming this deduction, the accommodation should be self-occupied and neither you/your spouse/ your minor child should own any other residential accommodation in India or abroad. Also, there is a requirement of filing a declaration in Form 10BA for the rent paid. This form needs to be produced to the tax authorities at the time of scrutiny, if required.

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Kuldip Kumar, executive director, tax & regulatory practice, PwC, answers your questions