Section 80GG – Claim Deduction for Rent Paid

If you are not receiving a House Rent allowance but paying rent, you can still get a tax deduction on the rent paid under Section 80GG of the Income Tax Act, 1961. The maximum deduction allowed under Section 80GG is Rs 60,000 per annum which means Rs 5000 per month.

You cannot avail of the benefit of this section if the house property is of your wife or minor child. To claim the benefit under this section needs to fill form 10 BA.

Who can claim deduction under Section 80GG?

An employee or self-employed person who is not getting House rent allowance and has not received HRA at any time during the financial year.

A person must meet certain prerequisites to avail of tax deductions under this specific section of the Income Tax Act. Listed below are some of the factors that an individual must fulfill to claim Section 80GG deduction.

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• Only individuals and Hindu Undivided Family (HUF) are eligible to claim these tax deductions. Businesses or other enterprises cannot avail of the same tax discounts upon paying rent in a given financial year.
• Individuals who are either salaried professionals or self-employed can take advantage of this provision. If one has no income to speak of, he/she is disqualified from seeking Section 80GG income tax benefits, even if he/she pays the rent.
• Those seeking to avail of this tax rebate need to submit a duly filled Form 10BA to the government beforehand. This Form is a declaration that the individual filing it does not claim benefit from a self-occupied property in any location.
• Section 80GG of the Income Tax Act is specifically designed for those who do not receive a home rent allowance from their employers. If a person’s salary includes HRA payment, he/she is ineligible to claim income tax rebates related to housing rent.
• If the yearly rent amount exceeds Rs.1 lakh, the taxpayer will need to submit a copy of the homeowner’s PAN card to claim tax benefits under Section 80GG of the Income Tax Act. Keep in mind that this PAN card must belong to the property owner where one resides on rent.
• An individual must not have claimed HRA at any time during the fiscal year for which he/she is claiming the tax benefit under Section 80GG. This is a crucial point for those who have changed employers in the last year. Even if one did not receive HRA for a major portion of the year, acquiring the same for just a month disqualifies his/her from claiming this yearly reprieve.

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Individuals residing with their parents in a property owned by their parents are also eligible to claim Section 80GG benefits. To do this, one would need to sign a rental agreement with his/her parents. Additionally, the amount shown as rent will be taxable when the parents file their yearly taxes.

Non-resident Indians are also eligible to claim tax benefits under this provision. However, they must be paying rent for a property in India to apply for the same.

Deduction under Section 80GG

The deduction under Section 80GG is given to the least of the following:

• Total rent paid minus 10% of basic salary.
• Rs 60,000 per year (Rs 5,000 per month).
• 25% of the adjusted gross total income.

Process of Tax Calculation under Section 80GG

Example 1

Rahul is earning 5 Lakhs on annual basis and stays in a rented accommodation for which he is not getting any house rent allowance. The annual rent being paid by Rahul is Rs 1.5 lakhs. In such a case the deduction would be least of the following:

• Condition 1: Monthly rental limit of Rs 5000 every month i.e. 60,000 per annum.
• Condition 2: Rent paid i.e. 1.5 lakhs minus 50,000 (10 % of annual income) = 1 lakh.
• Condition 3: 25% of the total annual income = 1.25 lakh.

In the example above, since Condition 1 is the least amount, Rahul would be eligible for benefit as per condition 1 only.

Example 2

Rohit earns 3 lakhs annually (after all deductions) and stays in a rented accommodation for which he is not getting any house rent allowance. Rohit pays 6,000 per month as rent for his house and the annual rent being paid is Rs 72,000. In such a case the deduction would be least of the following:

• Condition 1: Monthly rental limit of Rs 5,000 every month i.e. 60,000 per annum.
• Condition 2: Rent paid i.e. 72,000 minus 30,000 (10 % of annual income) = 42,000.
• Condition 3: 25% of the total annual income = 75,000.

In the example above, since Condition 2 is the least amount, Rohit would be eligible for benefit according to condition 2.

Recommended Read: Income tax returns 2021-22: Here are the financial transactions that will get reported to the I-T department

What is form 10BA?

Form 10BA is basically a declaration filed by the taxpayer claiming his deduction under section 80GG. The form is very easily available at all tax offices, the HR department of the employer, or it can also be downloaded from various websites.

Below mentioned are the details which the assessee needs to fill. The assessee should always ensure the details are fully accurate and updated.

• Name of the assessee with PAN.
• Full address of the premises with Postal Code
• Residency tenure in months
• Mode of payment
• Amount of payment
• Name and address of the landlord.

In case the annual rental is more than 1 lakh for the assessment year, then the PAN number of the landlord is mandatory.

Declaration to confirm that no other residential accommodation is owned by the taxpayer himself or in name of the Spouse / minor child or by the HUF in which he is a member.

• Name of the assessee with PAN.
• Full address of the premises with Postal Code
• Residency tenure in months
• Mode of payment
• Amount of payment
• Name and address of the landlord.
• In case the annual rental is more than 1 lakh for the assessment year, then the PAN number of the landlord is mandatory.

Declaration to confirm that no other residential accommodation is owned by the taxpayer himself or in name of the Spouse / minor child or by the HUF in which he is a member.