Welcome to another segment of our blog on Basics Of Income tax, we have started our journey from section 80C topic & in our last topic we have learned about deduction option on interest income via section 80TTA(1)/80TTB. Now we will move further in to section 80 to study n learn more opportunity of saving tax.
Sub Section 80GG
Working professional salary has a component of HRA (House Rent Allowance) in it, this HRA adds up & increase your tax liabilities but utilizing the section 80GG we can claim rebate on this part. Section 80GG applies to professionals who are living in rented apartment, but here we would like to make it clear that if any person living his/her parents home can also claim deduction under.
Let’s learn with an example; Mr. Bhanu is an IT professional who works in Noida & stay in a rented apartment. His monthly rent is Rs. 12000, he is also getting salary (basic salary + DA) of Rs. 42,000 an HRA of Rs. 6000 per month. Now let’s analyse how much rebate he can take under this section.
- His yearly rent is Rs. 1,44,000
- His yearly salary (basic salary + DA) is Rs. 5,04,000
- His yearly HRA is Rs. 72,000
Now we will calculate amount as per deduction options, but remember only least among these will be accepted:
- Actual yearly HRA received – Rs. 72,000
- 50% of [basic salary + DA] for those living in metro cities (40% for non-metros) – Mr. Bhanu lives in Noida & its in NCR, so as per norms final amount is – Rs. 2,52,000
- Actual rent paid minus 10% of salary (basic + DA) – Rs. 1,44,000 – 50,400 = Rs. 93,600
So as per above calculation acceptable amount for deduction under 80GG is Rs. 72,000 (because lowest of above three is acceptable)
Some points needs to be remembered before filling the ITR:
- If you have taken a house on rent and are making a payment in excess of Rs 1 lakh annually – remember to provide the landlord’s PAN. Else, you may lose out on the HRA exemption.
- Landlords without a PAN must be willing to give you a declaration refers circular No. 8/2013 dated 10 October 2013.
- Tenants paying rent to NRI landlords must remember to deduct TDS of 30% before making the payment towards rent.
- If pay rent for any residential accommodation occupied by you, but do not receive HRA from your employer, you can still claim the deduction under Section 80GG.
- You can claim deduction even if you are living in parent house. Provided you enter into a rental agreement with parents and transfer money to them every month.
Sub Section 80E
This section belongs to deduction form education loan. Under this section 80E interest paid by individual during the financial year is eligible for deduction. What make this section most interesting & most useful is there is no capping on amount of deduction. So what so ever amount (Rs. 10000 or Rs 500000) you are paying in given financial year will be acceptable for deduction. Let’s go through the different aspects of this section:
- The deduction under this section is available only to individuals.
- The loan could be taken from any bank / financial institution or any approved charitable institutions.
- The purpose of loan should be pursuing higher studies. It does not matter whether such education is taken in India or outside India.
- Most important this deduction is over & above 80C deduction (i.e. Rs. 2 Lac).
- Remember that deduction for the interest on loan starts from the year in which you start repaying the loan. You can avail deduction lowest of repayment period or 8 years (form starting of loan). Example if you complete the repayment of the loan in 5 years, then tax deduction will be allowed for 5 years and not for 8 years.
- There is no tax benefit for the principal part of the EMI.
This ends our today’s topic, see you in our next blog.