Increment in housing tax deduction limit-a relief to small tax payers

New Delhi, Mar 2 (KNN) After the announcement of increase in limit of deduction in respect of rent, small tax payers are at a relief as the tax deduction limit has been increased to Rs 60,000 per annum from the current Rs 24,000 on the housing rent.

“I propose to increase the limit of deduction in respect of rent paid under section 80GG from Rs 24,000 per annum to Rs. 60,000 per annum, which should provide relief to those living in the rented house” the Union Finance Minister , Arun Jaitely said  in his Budget speech on February 29.

“80GG is a thinly discussed/ understood clause. With its mention in the Budget, at least people who are eligible to this deduction but missing out so far would start benefitting,” said Vinit Kishore, a Chartered Accountant and Chief Financial Officer (CFO) at WAISL.

“Also the maximum cap of deduction of Rs. 2,000/- per month was unrealistic low, hence Government has probably done a course correction,” he added.

Kishore said that most of the salaried person staying in rented houses have HRA in their salary structure, hence benefit with some deduction in taxable income.

“For entrepreneurs or self-employed (or even employed people without HRA component in their salary) staying in rental houses, the three deduction U/S 80GG were, Rent paid minus 10% of total income (excluding capital gain/ loss),  Rs. 2,000 pm, and 25% of total income (excluding capital gain/ loss,”  he told KNN.

Calling the increment from Rs. 2,000 pm to Rs. 5,000 pm, a late but welcome move from the Government, Kishore stated that India has a very large base of self-employed people or low salary base people without HRA component. The new clause would help all of them to save taxable liability.

“With context of this particular section, Budget has done a good job. With respect to overall Budget from an individual middle income person perspective, however, Budget marks a missed opportunity feeling,” he said. (KNN Bureau)