Most salaried individuals get a House Rent Allowance (HRA). Under Section 10(13A) of the Income Tax Act, the amount spent on paying house rent is tax deductible. The special thing is that this exemption can also be availed by those who are self-employed instead of working. Also, employees who do not get HRA are entitled to an exemption on the house rent paid. Self-employed people can claim a deduction for House Rent Allowance (HRA) and HR tax exemption under Section 80GG of the Indian Income Tax Act.
Section 80GG allows tax exemption on rent paid in the relevant financial year. You will get tax exemption on -
Rs 5,000 per month (Rs 60,000 per annum),
25 percent of total income,
or the amount remaining after deducting 10 percent of total income from the actual rent paid,
whichever is less. For example, if you pay a rent of Rs 60,000 per month but after deducting 10% of the total income from the rent paid, the remaining amount is less than Rs 60,000, then you will get tax exemption only on that amount and not on the rent paid.
Capital gains are not included in total income.
Long-term capital gains and short-term capital gains are not included in total income under section 111A. If you or your spouse owns a house where you live or run your business activities, then you are not entitled to this exemption. Like HRA, this tax exemption is available only in the old tax regime.
How to get this exemption
You can claim this exemption while filing an income tax return. You do not have to provide a rent agreement or rent receipt as proof, but you will have to keep these documents safe for future needs. You will have to give all the information in your ITR form and apart from this, you will also have to fill 10BA form. In this form, you will have to fill in your name, PAN number, Aadhaar, address, rent period, landlord's property details, etc.
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