If you own a house, rent paid may not qualify for tax deduction

If the construction is completed, your eligibility to get the tax deduction would depend on whether you let out the property

My only source of Income is ‘interest’. I live in a rented house. I have an under-construction flat. Can I claim tax deduction on rent paid under section 80GG for AY2017-18? I have already filed my tax return (ITR 1). Can I file a revised return? I don’t have a rent agreement or any receipts.

—Sangita Singh

You can claim tax deduction for the rent paid under section 80GG of the Act, but only if all the conditions prescribed (including the circumstances in which claim can be made, ceiling of the tax deduction, etcetera) are cumulatively met. If you or your spouse, minor child, or Hindu Undivided Family (HUF) of which you are a co-partner, own any house in the city you live in, you may not qualify for this tax deduction. You may also be ineligible for this deduction if you own a house in any other city if such house is not let out.

However, since the flat you own in another city is still under construction, you may still be eligible to seek this tax deduction until such time construction is completed. Once the construction is completed, your eligibility to get the tax deduction would depend on whether you let out the property you own. This tax deduction cannot be claimed if the rent paid by you is less than 1% of your total taxable income (before claiming this deduction) and is further capped to the lower of Rs5,000 per month or 25% of your taxable total income.

If you satisfy the above conditions, you will need to file a revised return along with a declaration in Form 10BA, any time before 31 March 2018 or before completion of assessment, whichever is earlier.

It would be advisable for you to keep the documents (rental agreement and/or rental receipts) evidencing the rent paid in case the tax authorities seek evidence at the time of scrutinizing your tax return. If the rent is paid in cash, you should obtain a rent receipt from your landlord.

I have been working in a nationalised bank since October 2016. Before this I had worked in a private firm for 6 months and had to pay Rs1 lakh to be relieved. Can I deduct this amount from the total income for the purpose of filing income tax?

—Nagendra Goyal

There is a school of thought that “notice pay" recovered from an employee in connection with termination of the employment contract can be reduced from taxable salary income. A recent judicial pronouncement by the Tax Tribunal in Ahmedabad supports such a claim.

However, since there are no express provisions in the Indian tax law that permit the reduction of notice pay, such a claim could be litigious.

Parizad Sirwalla is partner (tax), KPMG. Queries and views at