Deductions Under Section 80GG of Income Tax Act

section 80gg deductions — (Source: shardaassociates)

In a country like India, where rent inflation remains a major issue, especially in metro cities like Mumbai, tax benefits under Section 80GG come as a huge aid. This special provision is applicable to people not receiving a house rent allowance (HRA) and bearing the rental costs all by themselves.

Generally, to avail Section 80GG deduction for rent paid, both self-employed and salaried individuals must comply with certain conditions. All such details, including the maximum deduction limit, eligibility requirements, etc., are covered in this article.

Have a look!

Maximum Deduction Limit Under 80GG of Income Tax Act

Under Section 80GG, you can claim up to Rs.60,000 per annum in case you have not received HRA at any time in a particular financial year. And, the quantum of the deduction is supposed to be the least of the following:

Rs.5000 per month.
The total amount paid as rent (annually) minus 10% of basic salary.
25% of the total adjusted annual income.

To understand it better, find the illustration on the 80GG deduction calculation below:

Let’s assume your annual income is Rs.8 lakh, you are not currently receiving a house rent allowance from your employer, and you are paying Rs.11,000 monthly as house rent. Then, according to the three conditions mentioned above, the applicable tax exemption amounts will be:

Rs.5,000 monthly (Rs.60,000 yearly), under the first point.
Rs.52,000 {(11,000*12) - (8,00,000*10%)}
Rs.2,00,000 (8,00,000*25%)

Since the lowest amount among these will be applicable as tax deduction under Section 80GG, you will be able to claim only Rs.52,000. It is imperative to know that if the rent that you are paying exceeds Rs.1 lakh per year, you will have to submit your landlord’s PAN CARD for that.

Now that you know about the maximum 80GG deduction limit and how it gets calculated, check the eligibility requirements as per Income Tax Act before going ahead with the claiming process.

Eligibility Parameters to Claim Rent Deduction Under 80GG

As stated earlier, people receiving HRA as part of their salary package will not be able to claim deductions on income tax under Section 80GG. Apart from that, here are some conditions you are required to fulfil before filing form 10 BA for 80GG. Check them out!

The residential accommodation you are currently living in should not be owned by you or your spouse and minor child. As a matter of fact, Section 80GG is not even applicable to people owning a self-occupied property in another city.
Only the self-employed, Hindu Undivided Families (HUFs) and salaried individuals will be able to claim tax exemptions under this section; companies cannot avail these benefits.
In case you are using the rented house to conduct any business/work activity, Section 80GG deduction will not be applicable to you.

Note that there are also certain exceptions available under this particular section of the IT Act, enabling you to maximise its benefits. For instance, people living with their parents can claim the rent deduction benefits. All they have to do is make a rental agreement with their parents.

You should also know that the rental agreement should show that the annual rent expenditure is Rs.60,000. You will be able to get more benefits if your parents are retired, senior citizens. However, the rent deduction benefit on taxable income is not applicable in the case of joint ownership.

Tax Deduction Under Section 80GG for Property Owners

Section 80GG of the Income Tax Act allows property owners to claim tax exemptions; however, they need to meet certain criteria to be eligible for that. For instance:

The property you own should be in a different city from your workplace location. Section 80GG benefits will not be applicable to those who have a property within the city yet living in a rented space.
You must pay the rent for the property you are residing in.

Oftentimes, people end up changing multiple employers in a particular financial year. In such cases, if they receive HRA even just for a month, they will not be able to claim tax deductions for the rent paid under Section 80GG.

With all this information, it should be easier for you to bring down your tax liability under Section 80GG. However, before going ahead, make sure to check all your payslips for that financial year, just to be sure!

Frequently Asked Questions

✓ Is it mandatory to file Form 10BA to claim Section 80GG deduction?

Yes, taxpayers who want to claim a deduction for rent paid on rental property must present a statement in Form 10BA before filing ITR.

✓ Which details should be submitted to claim a deduction u/s 80GG?

You must provide the following details to claim house rent deductions:

PAN card
Details of the amount paid
Landlord’s name and address
Details regarding payment mode
Declaration confirming that neither of you and your family members owns any other residential property.