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Rent tax worries self-employed persons
February, 13th 2007

You get a house rent allowance if you are a salaried employee. But for self-employed individuals there is a tax rebate.

But due to an archaic income tax provision, the tax rebate is a pittance compared to the actual rent that many self-employed individuals end up paying.

Vinay Raj hands out Rs 10,000 to his wife to pay the house rent.

A year ago, Vinay was a salaried employee working with a multi-national company and entitled to a house rent allowance. But its a benefit he no longer enjoys, now that he's self-employed.

"When he was in job he used to get the HRA benefit. Now we have to take care of the house rents as well, which is an extra burden on the budget," says Vinay's wife Monica Raj.

Vinay, a 34-year-old Chartered Accountant lives with his wife and two kids in a three-bedroom apartment in West Delhi.

Like any other self-employed person, Vinay is entitled to a tax deduction of up to 25 per cent of his total income, under section 80 GG of the income tax law.

But this provision comes with a rider the deduction cannot be more than Rs 2000 per month!

"No one can get one room in Delhi by spending Rs 2,000 per month. I am paying Rs 10,000 per month but getting the benefit of Rs 2,000 only," said Vinay.

As real estate prices soar and rentals go though the roof across metros, it's becoming increasingly difficult for self-employed individuals like Vinay. They desperately claim a reasonable tax deduction for the house rent they pay.

"Finance Ministerji don't you think time has come to consider people like me, who don't get HRA benefits and spend lot of money by staying in metros and getting almost nil exemption?" asks Vinay.

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