- Rent is a major expense for salaried Indians, often the largest monthly cost
- Section 80GG allows rent deductions for those not receiving HRA, with conditions
- Homeowners living on rent elsewhere can claim both rent and home loan tax benefits
For millions of salaried Indians, rent is no longer just a monthly expense. It is often the biggest financial commitment they make every month.
And with rents continuing to rise across India's major cities, many tenants are looking for ways to ease the burden. While most taxpayers are familiar with House Rent Allowance (HRA), tax experts say several lesser-known provisions under the old tax regime can help renters lower their tax outgo -- even if they do not receive HRA from their employer.
According to Sarika Shetty, Co-founder and CEO of RentenPe, the conversation around rent and taxation is changing rapidly as more Indians spend a larger share of their income on housing.
"Rent is increasingly becoming one of the largest expenses in urban household budgets. Yet many taxpayers continue to associate rental tax benefits only with HRA," Shetty said.
Tax Relief Even Without HRA
One of the most overlooked provisions is Section 80GG of the Income Tax Act. The section allows taxpayers who do not receive HRA to claim deductions on rent paid, subject to certain conditions.
Shetty highlighted that the benefit is particularly relevant for consultants, gig workers, freelancers and employees whose salary structures do not include an HRA component.
Under Section 80GG, the deduction available is the lowest of three amounts: Rs 60,000 annually, 25 per cent of total income, or rent paid minus 10 per cent of total income.
However, taxpayers must meet specific compliance requirements. Form 10BA must be filed, the taxpayer should not own a residential property in the city where they work, and landlord PAN details may be required when annual rent exceeds Rs 1 lakh.
"Many eligible taxpayers miss out on the deduction simply because they are unaware of the procedural requirements," Shetty noted.
Homeowners Can Claim Benefits Too
Experts say another common misconception is that people who own a house cannot claim rent-related tax benefits. In reality, many professionals own a property in one city while living on rent in another because of work commitments.
In such cases, taxpayers may still be able to claim rent deductions while also availing home loan-related benefits under the old regime.
As Shetty explained, Section 24(b) allows deductions of up to Rs 2 lakh annually on interest paid for a self-occupied property. Additional benefits may also be available on principal repayment under Section 80C and through provisions such as Section 80EEA for eligible homebuyers.
This combination can significantly enhance tax savings for individuals balancing both rent and home loan commitments.
Paying Rent To Parents? Documentation Matters
Another tax-saving route that often attracts attention is paying rent to parents. Tax experts stress that the arrangement is perfectly legal, provided it is genuine and properly documented.
Shetty said taxpayers should ensure there is a formal rental agreement, rent is transferred through banking channels, and parents disclose the rental income in their tax returns.
With tax authorities increasingly relying on digital verification and data matching, informal arrangements backed only by cash payments or handwritten receipts may invite scrutiny.
Digital Rent Records Becoming Important
The growing formalisation of India's rental market is also changing how taxpayers approach rent payments.
Digital transfers, online rent payment platforms and electronic rental agreements are creating clearer records for both tenants and landlords.
According to Shetty, these records do more than support tax claims. They also help create a documented financial history that can strengthen an individual's credit profile.
"The rental ecosystem is becoming increasingly formal and digital. A transparent rent payment trail not only helps with tax compliance but can also contribute to financial credibility over time," she said.
More Than Just A Monthly Expense
As rents remain elevated in India's biggest cities, tax planning around housing costs is becoming more important than ever.
Industry observers believe many taxpayers continue to leave money on the table by focusing only on HRA while ignoring other provisions available under the old tax regime.
Shetty said renters should view housing expenses through a broader financial lens. Beyond providing a place to live, properly documented rent payments can unlock tax benefits, strengthen financial records and potentially support future wealth creation.
