You may not have your own house with a loan (as yet) but that doesn’t mean that you cannot avail of tax benefits. Even if you are staying on rent and your company is paying you house rent allowance (HRA) you can avail tax benefit. Many a times, your company’s HR department does the tax calculation for you, which is a great convenience, but it is always a good habit to know how the expenses can be deducted from your income so as to reduce your tax liability.
Of course this benefit (exemptions) can be availed only if you follow the existing tax structure.
Let me illustrate how much can be shown towards expenses.
The least amount of the following three is considered eligible for the benefit:
1. Actual HRA received (per annum)
2. Actual rent paid (per annum) minus 10% of your salary (per annum)
3. If you are staying in a metro, then 50% of your salary or 40% of your salary
Now let us work out an example:
> You are staying in Mumbai and your salary is Rs 25,000/- per month
> The HRA received from your company is 12,000/- per month
> Rent is Rs 10,000/- per month
Now, the calculation:
1. HRA received: 12,000 x 12 = 1,44,000/-
2. Rent – 10% salary: (10,000 x 12)-( (25,000 x 12)*10%) = 1,20,000 – 30,000 = 90,000
3. Staying in a metro: (25000 x 12) x 50%= 1,50,000/-
So the least of the above three is point # 2. Rs 90,000/-.
You are allowed to deduct this amount from your Income u/s 80 GG. This is how you can verify your tax statement.
For detailed calculations, do take support of your CA or financial consultant.
Thank you,
Anand Mhapralkar
Certified Financial Planner^CM
http://www.AnantWealth.com
Anant Wealth 