Exemptions/Deductions for House Rent Allowance (HRA) and Section 80GG, with Automatic Prepare Form 16 Part B and Part A&B for the Financial Year 2014-15

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In case you are in receipt of House Rent Allowance
(HRA) from your employer, you may avail exemption from the same while filing
your ITR. In case you are not in receipt of HRA and you are paying rent, then
you may claim tax deduction under section 80GG of IT Act, 1961 subject to
certain deductions.

Below are the important
provisions regarding HRA and section
80GG –

[A] HRA – In
respect of HRA, the least of the following 3 is exempt from tax u/s 10(13A):
40% salary (50%
in case of a metropolitan city);
Actual HRA
received from employer during the period the rented house is occupied by the
The excess of
rent paid over 10 per cent of salary.
Note: Salary for the purpose of
HRA means – Basic + DA (only if forming part of salary for retirement benefits)
+ any fixed % commission on sales turnover.
[B] Section 80GG – Deduction for
Rent Paid
In case you are not in receipt of HRA and Rent free
accommodation (RFA) and you/your spouse/children do not own any residential
property either at the place of your work or residence, or if your
spouse/children own a residential property at any other place (but not the
assessee), then you can claim deduction for the rent paid as per sec 80GG under
Income Tax Act, 1961. The same is explained below:

Deduction (under sec 80GG) allowed is least of the 3
options below:

Rs 2000 per
Excess of rent
paid over 10% of Adjusted total income
25% of Adjusted
total income
where, Adjusted total income:
Gross total income
LTCG (if already included in Gross Total income)
STCG (if already included in Gross Total income)
All deductions other than the deduction under Section 80GG

Important Points regarding section 80GG:

No deduction if
you are a member of a Hindu Undivided Family (HUF), and the HUF owns a house at
the place where you normally stay, work or conduct business.
You need to be
paying rent, and for your own accommodation, not for your parents’
You need to
declare that you are paying the rent. This has to be done by filling out and
filing from 10-BA.

The house is to
be situated within specified municipal areas. However, all major cities are a
part of the specified municipal areas.

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