Your Taxes

I am running a shop. Apart from income from the shop, I earn rental income on a property owned by me. However, I live in a house not owned by me and pay rent for the same.

Can I deduct my rental expenditure against my rental income on the house that I own?

Rental income earned by you would be taxable in your hands under the head, ‘Income from House Property’. You cannot claim deduction of the rental expenditure against your rental income.

However, a deduction as per Section 80GG of the Income-Tax Act, 1961 (the Act) can be claimed in this regard.

The deduction is available to an assessee who is not employed or who does not receive house rent allowance from his employer (in case he is employed) and incurs expenditure on payment of rent.

It is limited to the lower of the following:

−Expenditure incurred on rent, less 10 per cent of total income; or

−25 per cent of total income;

−₹2,000 per month (i.e. ₹24,000 a year).

You may note that no deduction is available under Section 80GG if:

1. The rent incurred by the assessee pertains to the house owned by him, or his spouse or minor child or by a HUF (of which such assessee is a member at a place where he ordinarily resides or performs duties of his office or carries on his business of profession); or

2. The assessee owns a self-occupied house at any other place whose annual value is nil.

Accordingly, subject to the above conditions, you may claim deduction under Section 80GG of the Act from your taxable income.

The writer is a practising chartered accountant. Send in your queries to >taxtalk@thehindu.co.in

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