Lesser Known Tax Benefits on Rent

In Union Budget 2019-20, the tax exemption limit on rental income was increased to Rs 2.4 Lakh from the earlier Rs 1.80 Lakh. The government also proposed to exempt tax on notional rent for unsold units for two years. In this backdrop, we take a look at some of the lesser-known income tax benefits that you can avail on the rent paid.

Rent paid for running a business

Do you run a business from a residential building?  Well, you can claim tax exemption for the rent paid as business expenditure. You are also eligible to claim exemption against your business income for any additional expenses like municipal taxes or to carry out any repair or renovation work. The premises may be commercial, a warehouse, or even a factory.

If the rent exceeds Rs 1.80 Lakh in a year, you must deduct 10% tax at source for rent.

Tax benefits for salaried employees who receive HRA

Section 10(13A) of the Income Tax Act, 1961 allows an exemption on HRA. For calculating the exemption amount, the lowest of the following is considered for exemption:

• Actual HRA received from the employer
• 50% of salary if the employee lives in one of the four metro cities and 40% if the employee lives in other cities
• Actual rent paid minus 10% of salary

However, if your rent amount is less than 10% of your basic salary, you cannot claim HRA exemption. This means that the HRA amount will become taxable in your hand. Also, if your employer does not give you any HRA under Section 10 (13A) of the Income Tax Act, you will not be eligible to claim an exemption.

Additionally, if you are paying rent for the accommodation occupied by your parents while staying in your own house, you cannot claim the tax benefit of HRA. You should not own the accommodation which you are occupying and paying rent for.

Tax benefits for people who are not in receipt of HRA or are self-employed

Under Section 80 GG, salaried people who do not get any HRA from their employer or those who are self-employed can avail tax benefits in the form of a deduction from taxable income.

In such cases, the deduction available is Rs 60,000 annually, subject to a maximum of 25% of the total taxable income.