HRA Exemption vs 80GG Deduction: Which One to Claim?
- Nimisha Panda
- Nov 7
- 9 min read
House Rent Allowance (HRA) exemption and Section 80GG deduction are two separate tax benefits under the Indian Income Tax Act that reduce taxable income for individuals paying rent. While HRA exemption under Section 10(13A) is available only to salaried individuals receiving HRA as part of their salary, Section 80GG provides relief to those who pay rent but do not receive HRA, including self-employed individuals. Understanding the distinction between these two helps taxpayers choose the option that maximizes their savings and ensures compliance with documentation requirements.
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HRA Exemption vs 80GG Deduction: Which One to Claim?
House Rent Allowance (HRA) exemption and Section 80GG deduction are both provisions under the Indian Income Tax Act designed to provide relief to individuals who pay rent for residential accommodation. However, these two benefits apply to different categories of taxpayers. HRA exemption under Section 10(13A) applies only to salaried individuals who receive HRA as part of their salary package. Section 80GG, on the other hand, benefits individuals who do not receive HRA—typically self-employed persons or salaried employees without an HRA component in their salary.
If rent is paid and HRA is part of the salary, claiming HRA exemption is generally more beneficial as it offers higher tax relief. However, if there is no HRA component, Section 80GG can be claimed instead, provided the conditions of non-ownership and Form 10BA declaration are met. Both benefits cannot be claimed simultaneously, so taxpayers must choose based on their employment and rent situation.
Understanding HRA Exemption under Section 10(13A)
HRA exemption is governed by Section 10(13A) of the Income Tax Act. It applies exclusively to salaried individuals who receive HRA as part of their salary. The exemption is allowed only when rent is paid for residential accommodation occupied by the employee.
The amount of exemption is the least of the following three:
Actual HRA received from the employer,
Rent paid minus 10% of the basic salary,
50% of the basic salary if the residence is in a metro city (Delhi, Mumbai, Kolkata, or Chennai) or 40% in non-metro cities.
To claim the exemption, employees must submit rent receipts and, if the annual rent exceeds ₹1 lakh, the landlord’s PAN must also be furnished. Payments made to a spouse are not eligible for exemption, but rent paid to parents can be claimed if proper rent receipts and proof of payment exist.
How HRA Exemption Works in the Old Tax Regime
Under the old tax regime, HRA exemption provides a significant tax-saving opportunity for salaried individuals. Since the old regime retains deductions and exemptions, employees can reduce their taxable income by claiming the least of the three HRA values mentioned above.
For example, a salaried person living in a metro city earning a basic salary of ₹50,000 per month and paying ₹20,000 rent can compute the exemption as:
Actual HRA received: ₹15,000
Rent paid minus 10% of salary: ₹20,000 – ₹5,000 = ₹15,000
50% of salary (metro): ₹25,000
The least of these amounts, ₹15,000, will be exempt from tax. The remaining HRA, if any, becomes taxable.
Is HRA Exemption Allowed in the New Tax Regime?
HRA exemption is not available under the new tax regime. The new regime, introduced under Section 115BAC, offers lower tax rates but removes most exemptions and deductions, including HRA. Taxpayers opting for the new regime cannot claim exemptions under Section 10(13A).
Therefore, individuals who pay rent and wish to claim HRA exemption must continue under the old regime if the tax benefit outweighs the lower rates of the new regime.
Eligibility and Calculation of Section 80GG Deduction
Section 80GG of the Income Tax Act offers relief to individuals or Hindu Undivided Families (HUFs) who pay rent but do not receive HRA. This deduction applies to self-employed individuals and salaried employees who do not get HRA as part of their salary.
The eligibility conditions are as follows:
The individual must not receive HRA from an employer.
Neither the taxpayer, their spouse, minor child, nor HUF should own a residential property at the place of residence or employment.
Form 10BA must be filed, declaring that these conditions are met.
The deduction amount is the least of the following:
₹5,000 per month (₹60,000 annually),
25% of adjusted total income,
Rent paid minus 10% of adjusted total income.
Is Section 80GG Deduction Available in the New Tax Regime?
No, Section 80GG deduction is not available under the new tax regime. Since the new regime removes most deductions and exemptions, only taxpayers following the old regime can claim this benefit.
Taxpayers must therefore compare total tax liability under both regimes before opting, as the new regime’s lower tax rates might still offer better savings for some individuals even without 80GG.
Key Differences Between HRA Exemption and 80GG Deduction
Criteria | HRA Exemption | Section 80GG Deduction |
Applicable to | Salaried individuals receiving HRA | Self-employed or salaried individuals without HRA |
Governing Section | 10(13A) | 80GG |
Maximum Benefit | Based on salary and rent paid | Up to ₹5,000 per month |
Proof Required | Rent receipts and landlord PAN | Rent receipts + Form 10BA |
Ownership Restriction | Can own property outside work city | Cannot own property at place of residence or work |
Tax Regime Applicability | Old regime only | Old regime only |
Which Option Offers Better Tax Benefits?
HRA exemption usually offers a higher tax benefit because its computation is directly linked to actual rent and salary structure, which allows greater flexibility. In contrast, Section 80GG has a fixed upper limit of ₹5,000 per month, making it more restrictive.
Thus, salaried individuals receiving HRA should claim exemption under Section 10(13A). For self-employed persons or salaried employees without HRA, Section 80GG remains the only available option for rent-based tax relief.
Documentation and Compliance Requirements
To claim HRA exemption, the following documents are necessary:
Rent receipts or rent agreement.
PAN of landlord if annual rent exceeds ₹1 lakh.
Proof of payment through bank transfer, cheque, or UPI.
For Section 80GG deduction, the taxpayer must:
File Form 10BA before claiming the deduction.
Submit rent receipts or proof of rent payment.
Ensure no ownership of residential property in the same city.
Maintaining proper documentation ensures smooth claim verification during tax assessment or scrutiny.
How TaxBuddy Simplifies HRA and 80GG Claims
TaxBuddy provides AI-driven tools and expert support to help taxpayers calculate and claim HRA or 80GG benefits accurately. The platform automatically verifies eligibility, fills relevant forms such as Form 10BA, and ensures all necessary documentation is attached.
For salaried individuals, TaxBuddy’s guided self-filing system simplifies the process of reporting HRA exemptions with accurate computation. For self-employed individuals, it assists in filing deductions under 80GG with minimal errors. With expert-assisted plans, taxpayers can also receive personalized guidance to optimize their total tax savings.
Conclusion
Choosing between HRA exemption and Section 80GG deduction depends on whether the taxpayer receives HRA as part of their salary. HRA exemption typically provides greater relief for salaried employees, while Section 80GG is the right choice for those without HRA or who are self-employed. Careful documentation—such as rent receipts, landlord PAN, and Form 10BA—ensures that the claim is valid and processed without delay.
For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy offers flexibility through both self-filing and expert-assisted plans. The self-filing option is designed for individuals who prefer managing their returns independently. It uses AI automation to pre-fill income details, validate Form 16 data, and perform accuracy checks before submission. For those with multiple income sources—such as capital gains, business income, or foreign assets—TaxBuddy’s expert-assisted plan provides professional review and filing by qualified tax experts. This ensures every deduction, including HRA or Section 80GG, is accurately claimed for maximum tax savings.
Q2. Which is the best site to file ITR?
The official government platform, incometax.gov.in, is the statutory site for e-filing returns. However, private e-filing platforms like TaxBuddy have become preferred choices for many taxpayers due to their AI-driven interfaces, real-time guidance, and simplified workflows. TaxBuddy minimizes manual data entry by auto-importing data from Form 16, AIS, and bank statements, while also running error checks before submission. This blend of automation and expert review makes it one of the most reliable platforms for accurate and timely ITR filing.
Q3. Where to file an income tax return?
Income tax returns can be filed directly through the Income Tax Department’s e-filing portal (incometax.gov.in) or via authorized intermediaries like TaxBuddy. While the government portal serves as the official channel, platforms such as TaxBuddy provide an enhanced user experience—especially for those who want assistance in claiming exemptions like HRA or deductions under Section 80GG. TaxBuddy’s guided system ensures that every required field, from income details to deduction proofs, is accurately filled, reducing the risk of notices or mismatches later.
Q4. Is HRA exemption allowed under the new tax regime?
HRA exemption is not available under the new tax regime. The new regime introduced under Section 115BAC removes most exemptions and deductions to simplify tax calculations. Taxpayers opting for the new regime pay tax at reduced slab rates but cannot claim exemptions like HRA, LTA, or deductions under Chapter VI-A (including 80C, 80D, or 80GG). However, individuals still have the option to compare both regimes before filing and choose whichever results in a lower tax liability—something TaxBuddy’s AI system helps calculate automatically during filing.
Q5. Can self-employed individuals claim HRA exemption?
No, HRA exemption applies only to salaried employees receiving HRA as part of their salary structure. Self-employed individuals do not receive HRA and hence cannot claim this exemption. However, they can claim a deduction under Section 80GG if they pay rent for residential accommodation and meet the required conditions. For this, they must file Form 10BA declaring that they do not own a property in the city of residence or employment. Platforms like TaxBuddy make this process simpler by automatically generating and attaching Form 10BA when filing returns.
Q6. What is Form 10BA and why is it required?
Form 10BA is a mandatory declaration form for individuals claiming deduction under Section 80GG. It confirms that the taxpayer does not receive HRA, pays rent for residential accommodation, and meets the eligibility conditions—such as not owning a residential property in the city of residence or work. The form also captures rent details, landlord information, and rent payment amount. Without Form 10BA, a claim under Section 80GG may be disallowed during scrutiny. TaxBuddy automates the Form 10BA submission process and ensures it is correctly attached during ITR filing.
Q7. Can rent paid to parents be claimed for HRA exemption?
Yes, rent paid to parents can be claimed for HRA exemption, provided the arrangement is genuine and backed by valid documentation. The taxpayer must transfer rent through verifiable means such as bank transfers and obtain rent receipts. Parents must show the rent received as “income from house property” in their tax returns. However, HRA exemption is not allowed if rent is paid to a spouse, as this is not considered a valid landlord-tenant relationship under tax laws.
Q8. Is landlord’s PAN mandatory for claiming HRA exemption?
Yes, the landlord’s PAN is mandatory if annual rent exceeds ₹1 lakh. The Income Tax Department requires this to verify rent transactions and prevent false claims. Employees must submit the landlord’s PAN to their employer when submitting rent receipts to claim HRA exemption. If the landlord refuses to provide the PAN, the taxpayer must submit a declaration explaining the reason. Platforms like TaxBuddy guide users through this documentation step to ensure compliance during filing.
Q9. Can both HRA exemption and 80GG deduction be claimed together?
No, both benefits cannot be claimed simultaneously. A taxpayer can claim either HRA exemption under Section 10(13A) or a deduction under Section 80GG, depending on their employment and salary structure. If an individual receives HRA, they are ineligible for 80GG. Similarly, those claiming 80GG must declare through Form 10BA that they are not receiving HRA. TaxBuddy’s system automatically detects such overlaps and prevents duplicate claims, ensuring compliance and accuracy.
Q10. Is Section 80GG available to HUFs?
Yes, Hindu Undivided Families (HUFs) can claim deduction under Section 80GG if they meet the required conditions. The HUF should not own a residential property in the city where it resides or conducts business. Rent must be paid for accommodation occupied by the HUF, and proof of payment should be maintained. The deduction amount will follow the same limits as for individuals—least of ₹5,000 per month, 25% of adjusted total income, or rent paid minus 10% of adjusted total income.
Q11. How is adjusted total income calculated for Section 80GG?
Adjusted total income for Section 80GG is calculated by excluding the following from the total income:
Long-term capital gains,
Short-term capital gains taxable under Section 111A,
Deductions claimed under Sections 80C to 80U (except 80GG), and
Income related to foreign sources or exempted earnings.
This calculation ensures that the deduction under Section 80GG is applied fairly based on income from regular sources. TaxBuddy’s system automatically computes adjusted total income, ensuring accurate deduction calculation without manual intervention.
Q12. How does TaxBuddy assist in claiming HRA or 80GG benefits?
TaxBuddy simplifies the process of claiming rent-related tax benefits through automation and expert guidance. The platform identifies eligibility for HRA exemption or 80GG deduction based on user inputs. It calculates the deduction using verified formulas, fills out necessary forms such as Form 10BA, and attaches proof documents like rent receipts and landlord PAN details. Additionally, TaxBuddy ensures compliance with the latest CBDT notifications and prevents common filing errors. Its expert-assisted plans also allow professionals to review claims and optimize the taxpayer’s overall refund or tax savings efficiently.
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