HRA Increased from 24,000 to 60,000 Under Section 80GG: On the 29th of February, 2016, Finance Minister Arun Jaitley presented the 2016-2107 budget. He said that he proposed to increase the limit of the deduction of paid rent that had been set at ₹24,00 a year to ₹60,000 to provide relief for all those living in houses that are rented. Since then, there have been many questions about how one would be able to claim higher HRA exemption now. For someone that is a salaried employee and gets HRA, there would be no change in it. The limit on the HRA is for all of the other taxpayers, like self-employed professionals that are not getting the benefits of the HRA and they haven’t claimed the expense for the rent that is paid and comes under the other sections of the income tax while claiming a deduction that comes under Section 80GG. In this article, we will look at a few more specifics about this.
Section 80GG has provisions for Deductions for House Rent paid, but this is provided that the deduction for paying the House Rent hasn’t been claimed under any other section that is under the Income Tax Act. To put this simply, if a salaried person is given HRA by the employer and he claims a deduction under it, he can’t claim a deduction for the payment of rent under Section 80GG. The ones who can claim for a deduction under Section 80GG are those taxpayers that are not getting the HRA benefit and haven’t claimed the expense for the rent under any other section that comes under the Income Tax Act. And as mentioned before, the HRA limit coming under Section 80GG has had a proposition to increase it from ₹24,000 to ₹60,000.
House Rent Allowance
House Rent Allowance or the HRA is something given by the employer to their employee so that they can meet the expenses of rent for the accommodation taken by the employee for residence. Salaried employees that live in rented places can claim HRA for lowered taxes and this can result in being partially or completely being exempted from taxes. The allowance is only for the expenses that have to do with rented places. If you’re not living in an accommodation that is rented, the allowance is entirely taxable. The HRA is to be calculated by the employer and must be shown in Form 16 if the receipts for rent are being submitted in time.
Self-employed professionals cannot claim this as they don’t earn a salary. But they can claim the benefits on expenses for house rent that comes under Section 80 GG but it is subject to specific conditions.
Can you Use 80GG if the Employer Hasn’t Provided HRA?
If payments are being made for rent for an unfurnished or furnished accommodation for residence but don’t get HRA from the employer, you do meet the conditions to claim the deduction that is provided under Section 80GG.
Can Both HRA and 80GG be Claimed?
This is possible for a person that is salaried for a part of the year and the rest of the year they spend being self-employed.
How Much Tax Can Be Saved From This Increase?
The HRA increase from ₹24,00 a year to ₹60,000 results in the saving of the following that is for different salaries.
|Income||Five lacs||Ten lacs||Twenty lacs||One crore||One Crore|
|Increase under 80 GG||3708||7416||11,124||11,124||12792.6|
Conditions to Meet So That HRA Can Be Claimed Under Section 80GG
Section 80GG of the 1961 Income Tax tax states that a businessman, self-employed person and a salaried person can claim for a tax deduction incurred from house rent.
- You are either salaried or self-employed.
- You haven’t received HRA at any point in the year that you are claiming 80GG in. If you are salaried, then you shouldn’t have in the receipt of the house rent allowance that is given.
- You, your child, minor or otherwise, your spouse, an undivided Hindu family that you’re a part of, should not be owning a residential accommodation in that very place.
- You have to be a resident of the house you’re claiming the tax exemption for. Any person can live with you, so you can claim this deduction.
- Deduction under Section 80GG isn’t allowed if you own residential property from where you’re getting income for house property that comes under the applicable sections. This means that you are the owner of a house in another city and use it for residence and have not rented it out; you can’t claim the deduction even if you live in a rented house and pay rent at the location of your work in another city.
If a taxpayer claims a deduction under Section 80GG, they would need to show a declaration in Form 10BA stating that they have satisfied the conditions. The amendments have been proposed to be made effective from April 1st, 2017.
How HRA can be Calculated Under Section 80GG
Let’s talk about how HRA can be calculated under Section 80GG. The lowest amount that can be considered for deduction under Section 80GG is as follows:
- 25% of the total annual income.
- Actual rent that is less than 10% of the income
- ₹2,000 a month or ₹24,000 per annum. And ₹5000 from the financial year for 2016-17 or ₹60,000 per annum.
When it comes to the calculator of the deduction for house rent, the total income is to be calculated post the reduction of tax deduction under the various sections of chapter VIA apart from Section 80GG, short term as well as long term gain.
How Is The Exemption From The HRA Calculated for A Salaried Person That Is Receiving HRA?
The deduction that is available would be the minimum of the following amounts:
- The HRA that is received.
- The actual amount paid for rent.
- 50% of the basic salary of all those living in metro cities, but for those in non-metro cities, it goes down to 40%.
The Total Income for the Purpose of Section 80GG
The income that comes in the 80GG calculation refers to the Adjusted Gross Total Income that is to be claimed to post the deduction of long term capital gain as well as short term capital gain that comes under Section 111A, 115a, or 115D and the deduction of 80C to 80U.