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34.  Income Tax Saving if House Rent is Paid by Any Assessee

An employee who does not receive house rent allowance and has not been provided with rent-free residential accommodation by the employer, as also any other assessee, (for example a businessman), is granted a special deduction for the excess cost of house rent paid. However, this deduction under the provision of Section 8OGG of the Income Tax Act is limited to a maximum of ` 2,000 per month. Hence an employee has to so plan his residential accommodation and the rent payable by him, so that he gets the maximum advantage of ` 2,000 per month in the form of deduction. This deduction is allowed for expenditure incurred by an assessee of 10% of his total income towards house rent, irrespective of any furnished or unfurnished residential accommodation occupied by him. The maximum amount of excess expenditure permitted deduction, is limited to ` 2,000 per month, or 25% of total income for the year, whichever -is less. It should be remembered that this special provision does not apply in cases where:

(i) The residential accommodation is owned by the assessee or his spouse, or minor children;

(ii) An assessee is a member of a HUF and the residential accommodation is owned by the family at the place where he ordinarily resides or performs duties of his employment, business or profession; or

(iii) Owned by the assessee at any other place and used by him for self occupation.

To apply the deductible percentage, the assessee’s total income will have to be considered before allowing deduction for any house rent paid by the employee. The deduction is allowed to an assessee on accommo


dation situated in any part of India. However, Form No. 10BA has to be submitted by the employee to the employer.

For ready reference Form No. 10BA is reproduced hereunder which is required to be submitted to the employer:

Form No. IOBA

[See Rule 11B ]

Declaration to be filed by the aassessee claiming deduction under Section 8DGG

I/we _____________________________________________

[Name of the assessee with permanent account number)

do hereby certify that during the previous year ………………….. I / we had occupied the premises ………………….. [full address of the premises) for the purpose of  my/our own residence for a period of …………… months and have paid
` _________ in cash / through crossed cheque, bank draft towards payment of rent to
Shri/Ms/M/s ………………………………………………………. [name and complete address
of the landlord).

It is further certified that no other residential accommodation is owned by:

A. me/my spouse/my minor child/our family [in case the assessee is HUF), at……………………. where I/we ordinarily reside/perform duties of office or employment or carry on business or profession, or

8. me/us at any other place, being accommodation in my occupation, the value of which is to be determined u/s 23(2)(a)(i) or u/s 23(2)(a)(i) or u/s 23(2)(b).

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