Rent sop only `5,000 month

QI get a salary of `22,000 per month. Of this, I pay `8,200 towards my house rent. Can you please clarify whether actual house rent paid is eligible for tax deduction under Section 80GG? Do I need to pay income tax on this? M. KRISHNAMOHAN

Hyderabad

A) The deduction in respect of rent paid by an assessee can be claimed subject to certain conditions laid down under Section 80GG:

1) The rent paid is in excess of 10 per cent of his total income before allowing any deduction under this section.

2) The rent paid is in respect of accommodation occupied for the purpose of his own residence.

3) The amount of deduction is restricted to 25 per cent of total income or `5,000 per month, whichever is less.

The deduction is to be claimed only if neither the assessee or his spouse or minor child or his Hindu Undivided Family owns a house.

However, the deduction in respect of rent paid will be denied if the assessee, his spouse or minor child or Hindu undivided family of which he is a member, owns any residential accommodation at the place where assessee resides or performs the duties of his office or employment or carries on his business or profession.

If the assessee owns any residential accommodation at any other place and he claims tax concession in respect of self-occupied house property in respect of such accommodation, the deduction available under this section will be denied even if he does not own any residential accommodation at the place where he resides or works.

Since the assessee is an employee, if he gets house rent allowance (HRA) from the employer, he is eligible for exemption under Section 10(13A) of the Income-Tax Act. If he claims tax concession under Section 10(13A), he is not eligible for the deduction under Section 80GG.

Therefore, the deduction allowable for rent under the above mentioned Section after applying the provisions mentioned above will be restricted to `5,000 per month.

QI received money on the maturity on National Savings Certificates. Do I need to include it in my income? Can I claim tax deduction under Section 80C? SANTOSH KUMAR Vijayawada

A) The interest accrued on NSC has to be shown as income every year and the same amount can be claimed as reinvested under section 80C. However, since you have not admitted the interest income in earlier years, the same may be included in the financial year in which the NSC has matured. There will be no liability on the principal amount received back on maturity. Deposits for a minimum period of five years in FDs in banks or post offices are eligible for deductions under Section 80C.

The writer is a chartered accountant. You can your send queries to info@rathiandmalani.com