Non-salaried individuals such as freelancers, business owners, and self-employed professionals can claim tax relief on rental expenses through Section 80GG of the Income Tax Act 1961 or Section 134 of the Income Tax Act 2025. According to reports from Mint, taxpayers must choose the old tax regime to remain eligible for this specific deduction. The eligibility criteria include not receiving any House Rent Allowance from an employer, paying rent specifically for residential living space, and ensuring that the individual, their spouse, minor child, or Hindu Undivided Family (HUF) does not own residential property in the current location. As reported by Mint, an individual can claim a tax deduction under Section 80GG (IT Act 1961) or under Section 134 (IT Act 2025) provided they satisfy every single one of these criteria.
The tax-exempt portion of HRA received from employers is calculated as the minimum of three components: actual HRA received, 50% of salary for metro cities (Delhi, Mumbai, Chennai, Kolkata) or 40% for other cities, and excess rent paid annually over 10% of annual salary. As per the latest tax rules, the salary calculation includes basic salary, dearness allowance (DA) if part of retirement benefit, and commission based on percentage of turnover. No other allowances like special allowance are included in the HRA computation. For example, if an individual in Delhi pays ₹12,000 monthly rent with ₹30,000 basic salary and ₹15,000 HRA, the tax-exempt amount would be ₹1.08 lakh, with the remaining ₹72,000 taxable according to their income slab.
The final tax deduction under Section 80GG is determined by taking the lowest value among three calculations: ₹5,000 per month (totaling ₹60,000 per fiscal year), 25 per cent of the individual's total income (calculated before applying this specific deduction), or the actual rent paid minus 10 per cent of the individual's income (calculated before applying this specific deduction). As reported by Mint, the deduction functions with a much lower statutory ceiling of ₹60,000 per year, which is significantly lower than standard HRA exemptions that are directly tied to specific income brackets. The core distinction between HRA exemption and Section 80GG deduction lies in their monetary caps - while HRA exemption is reserved exclusively for salaried staff and calculated based on variables such as total HRA received, actual rent paid, and city of residence, the Section 80GG deduction maintains this rigid, low ceiling regardless of actual rental payments.
To successfully claim a Section 80GG deduction, taxpayers must retain proper documentary proof including a valid rent agreement or registered lease deed, official rent receipts, bank statements or electronic transfer receipts proving payment, and the landlord's PAN card details if the annual rent surpasses ₹1 lakh. According to Mint, filing Form 10BA is entirely non-negotiable and must be submitted online either prior to or right along with the final income tax return. This form acts as a formal declaration verifying that all prescribed legal conditions are met, and it must be submitted online either prior to or right along with your final income tax return. For HRA claims, employees must provide rent agreement and/or rent receipts to their employer to avoid excess TDS deduction. If annual rent payment exceeds ₹1 lakh, landlord's PAN must be provided to the employer as well. Recent updates to ITR-2 filing requirements now mandate that taxpayers must enter the acknowledgement number of Form 10BA in Schedule 80GG while filing their income tax return.
