Benefits of payments of rent for housing accomodation

Benefit of payment of rent can be claimed in two ways:

A. If House Rent Allowance ('HRA') is part of the compensation structure, then exemption can 

    be claimed from the allowance paid.

B. If employer does not give HRA as part of the compensation structure, then a deduction can 

    be availed from the gross total income.

These are explained in detail below:

A. When HRA is a part of the compensation structure

Least of the following can be considered as exempt from the amount of HRA paid to an 

individual by his employer:

a. Actual HRA received; or

b. Actual rent paid less 10 percent of 'Salary'; or

c. 50 percent of 'Salary' where the house is situated in Delhi, Mumbai, Kolkata, and Chennai 

(40 percent of Salary in other cases).

           "Salary" for the purpose of computing the above exemption will include basic salary and 

dearness allowance if the terms of employment so provide. It also includes commission based 

on a fixed percentage of turnover achieved by an employee as per the terms of contract of 

employment but excludes all other allowances and perquisites.

             However, the above exemption will only be available if actual expenditure has been 


incurred on the rent. This is to be supported by original rent receipts, along with a copy of the 


lease deed, to substantiate actual payment of rent.

Summary :

B. When HRA is not a part of compensation structure

         If the employer does not give HRA as part of compensation structure and expenditure is 

incurred on payment of rent for a housing accommodation, then deduction under Section 

80GG of the Act can be claimed by the individual.

Least of the following can be considered as exempt from the gross total income: -

a. Actual rent paid less 10 percent of the total income before allowing such deduction; or

b. Rs. 2,000 per month; or

c. 25 percent of total income before allowing such deduction.

         
         The exemption under Section 80GG will be provided only if a declaration is filed by the 

individual in the prescribed Form 10BA along with the return of his income.

           Additionally, this deduction will only be available to the individual if, the individual, his 


spouse or minor child does not own a residential accommodation at the place where he 


ordinarily resides or performs duties of his office or employment or carries on his business or 


profession. 

Further, the individual, spouse or minor child should not own a house at any other place 

which is considered as a self occupied