CA Group India

Exemption for HRA under Sec. 80GG

QUESTION: Under Sec. 80GG of the Income-tax Act in respect of those who are not getting house rent allowance (HRA), deduction from total income is allowed as: (a) rent paid less 10 per cent of taxable income or (b) 25 per cent of the taxable income or (c) rent at Rs.2,000 a month, whichever is the least.

The ceiling of Rs.2,000 was fixed several decades ago and because of this unrealistic limit in the present context, almost no taxpayer is able to avail of the exemption. One cannot even get a small single room even in the outskirts of a city/town for Rs.2,000 a month.

The average rent for a two-bed room flat in Chennai is Rs.15,000, in Hyderabad Rs.12,000 and in Visakhapatnam Rs.6,000 a month. There is thus need to enhance the ceiling for rent to at least Rs.10,000 a month in the present context.

ANSWER: Sec. 10(13A) grants exemption for house rent allowance with reference to excess over 10 per cent of the salary as long as it does not exceed 50 per cent of such salary in metropolitan cities and 40 per cent in other places. Sec. 80GG meant for those who do not receive house rent allowance would allow deduction of rent paid in excess of 10 per cent of the income, subject to an upper limit of Rs.2,000 or 25 per cent of the total income, whichever is less. The reader’s grievance is, therefore, justified.

In fact, the limit under Sec. 80GG has not kept pace even with the limits under Sec. 10(13A) obviously because the limit under Sec. 10(13A) could be subject matter of revision by notification, while the limit under Sec. 80GG is stipulated in the statute itself so that an amendment to law would be required for enhancing the limit. In fact, revision would be required for a number of deductions and exemptions which have become greatly diluted because of inflation.

There is a need for review of all limits. But even proposals in the Direct Taxes Code Bill, 2010, have not addressed this aspect of law relating to reliefs. There is need for substantial revision.

January 17, 2011

1 Responses on Exemption for HRA under Sec. 80GG"

  1. Profile photo of Vini Vini says:

    truely, there is a need for review of all limits……..

    Report user

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