Tax Planning - Deduction with respect to House Rents

House Rent is a major component of expenditure in personal financial planning.

In case of individuals working in a company, house rent is evaluated under House Rent Allowance (as per Section 10(13A) read with rule 2BA).

In case of individuals with business or profession, the following rule applies:

Rent paid (furnished/unfurnished) by the individual must be in excess of 10% of the total income.

Allowable deduction:

1. Excess of rent paid over 10% of total income
2. TWO thousand rupees per month
3. 25% of total income

Least of the above is allowed

Example - A sole proprietor trader's annual business turnover is 14,50,000. He pays annual rent of 2,40,000 and an additional maintainance of 18,000/-. His claim of deduction under section 80 GG.

 

Excess of rent paid over 10% of total income = 95000

TWO thousand rupees per month                  = 24000

25% of total income                                      = 362,500

Least of the above = 24000

Deductable under section 80 GG for Sole Propietor = 24000

Net Taxable income = 14,50,000 - 24,000 = 14,26,000