Many taxpayers believe that tax benefits on house rent are available only to salaried employees who receive House Rent Allowance (HRA) from their employers. However, India's income tax laws also provide relief to self-employed professionals, freelancers, business owners, and other individuals who do not receive HRA but live in rented accommodation.
Under Section 80GG of the Income Tax Act, and the corresponding provisions under the new Income Tax Act 2025, eligible taxpayers can claim a deduction for rent paid, subject to certain conditions and limits.
If you are paying rent but do not receive HRA, understanding this provision could help reduce your tax liability while filing your Income Tax Return (ITR) for FY 2025-26.
The deduction is available only to taxpayers who satisfy all the prescribed eligibility conditions.
To claim the benefit under Section 80GG, a taxpayer must:
Not receive any House Rent Allowance (HRA) from an employer.
Pay rent for a residential property occupied for personal use.
Not own a residential house in the city where they ordinarily reside, work, or conduct business.
Ensure that neither their spouse, minor child, nor Hindu Undivided Family (HUF) owns a residential property in the same city.
Submit Form 10BA before or along with the income tax return.
Taxpayers must also opt for the old tax regime, as this deduction is generally not available under the new tax regime.
Although both provisions provide tax relief for rent payments, they operate differently.
For salaried employees receiving HRA:
The exemption depends on salary structure.
The amount varies based on rent paid.
Metro and non-metro city classifications affect calculations.
There is no fixed monetary ceiling on the exemption amount.
For non-salaried taxpayers or those not receiving HRA:
A fixed deduction framework applies.
The maximum deduction cannot exceed ₹60,000 annually (₹5,000 per month).
Even if actual rent paid is significantly higher, the deduction remains subject to statutory limits.
The Income Tax Department calculates the deduction under Section 80GG using three separate methods.
The lowest amount among the following becomes the allowable deduction:
₹5,000 per month
₹60,000 per year
25% of Adjusted Total Income
Actual annual rent paid
Less 10% of Adjusted Total Income
The deduction ultimately allowed is whichever of these three figures is the lowest.
Suppose:
Adjusted Total Income = ₹6,00,000
Annual Rent Paid = ₹1,20,000
Maximum allowable deduction = ₹60,000
25% of ₹6,00,000 = ₹1,50,000
₹1,20,000 − ₹60,000 (10% of income) = ₹60,000
Since the lowest value among the three calculations is ₹60,000, the taxpayer can claim a deduction of ₹60,000.
Taxpayers should maintain proper documentation to support their claim in case of scrutiny by the Income Tax Department.
Important documents include:
Rent agreement or lease deed
Rent receipts issued by the landlord
Bank transfer records
Cheque payment proof
Digital payment confirmations
Landlord's PAN (mandatory if annual rent exceeds ₹1 lakh)
Proper documentation helps establish the genuineness of the rent payment claim.
One of the most commonly overlooked requirements is Form 10BA.
Before claiming the deduction, taxpayers must submit Form 10BA online. Through this declaration, the taxpayer confirms that all eligibility conditions prescribed under Section 80GG have been satisfied.
Failure to submit Form 10BA can result in the rejection of the deduction claim.
Many taxpayers forget to submit Form 10BA before filing their return, causing their deduction claim to become invalid.
Some taxpayers attempt to claim the full rent paid during the year, without considering the statutory calculation limits.
Large rent payments made in cash without receipts, agreements, or banking records may attract scrutiny from tax authorities.
When annual rent exceeds ₹1 lakh, failure to provide the landlord's PAN can create issues during assessment.
Section 80GG provides valuable tax relief to individuals who live in rented accommodation but do not receive HRA. Self-employed professionals, freelancers, consultants, business owners, and others falling into this category should evaluate whether they qualify for the deduction before filing their ITR.
While the benefit is capped at ₹60,000 per year, it can still help reduce taxable income significantly when claimed correctly. Ensuring timely filing of Form 10BA and maintaining proper rent-related documents are essential for a successful claim.
As the ITR filing season progresses, eligible taxpayers should review their rent payments carefully and make full use of the deductions available under the law.
