Section 80GG is a deduction under Chapter VI-A of the Income Tax Act. 80GG that provides tax relief to those individuals who do not avail any house rent allowance but pay rent for their stay. An individual can claim a deduction under 80GG for rent paid even if he does not get house rent allowance by his employer.
Section 80GG has been introduced to relieve some of the burden of house rent from your shoulders. This section allows deduction against the rental payments when you do not receive HRA. Living on rent has been a necessity for a large section of the working population. When you move around for work, you can’t afford to own houses everywhere. The result is that you need to rent an apartment. It’s a necessary expense. Therefore, income tax offers relief for the rent paid. If you are salaried you receive HRA and tax benefit on it to compensate you for the rentals. However, if you do not receive HRA or are self-employed, rent for residence could become a burdensome expense.
What is Section 80GG in Income Tax Act?
Section 80GG of the Income Tax Act provides relief for house rent paid in a financial year. This deduction is suitable for you as individual and HUF taxpayers especially if you are self-employed.
If you are salaried you are probably getting a monthly HRA (House Rent Allowance). Income Tax Act, 1961, allows a rebate on this allowance if you are living on rent. However, if you are self-employed or do not receive HRA, and living on rent, you can claim a deduction under section 80GG.
The deduction under this section will vary as per your salary, rent paid and city of residence; i.e., tier-I, tier-II, etc.
Section 80GG: Who is Eligible to Claim Tax Deductions?
One must meet particular essentials to avail tax deductions under this section of the ITA. Enumerated here are a few of the criteria that an individual must satisfy to claim Section 80GG deduction.
1. Solely individuals and Hindu Undivided Family (HUF) are qualified to claim these tax deductions. Businesses or other companies cannot avail of identical tax discounts against paying rent in a given fiscal year.
2. People who are salaried professionals or self-employed can also gain profit from this provision. If one has no income to the discourse of, they are excluded from endeavoring Section 80GG income tax advantages, yet if they pay the rent.
3. Those attempting to avail of this tax deduction must submit a correctly filled Form 10BA to the government before. This Form is a declaration that the person filing it does not claim privilege from a self-occupied property in any place.
4. Section 80GG of the Income Tax Act is specially produced for those who do not obtain a House Rent Allowance from their employers. If an individual's salary constitutes an HRA amount, they are unfit to claim income tax deductions associated with housing rent.
5. If the annual rent expense surpasses Rs.1 lakh, the taxpayer will have to present a copy of the house owner's PAN card to demand tax benefits supporting Section 80GG of the Income Tax act.
6. An individual should not have claimed HRA at any time during the fiscal year for which they are claiming the tax benefit under Section 80GG. This is a critical time for those who have switched employers in the previous year.
7. Even when a person did not procure HRA for a substantial part of the year, getting the same for only a single month disqualifies them from claiming this yearly reprieve.
8. Individuals residing with their parents in a property owned by their parents are also eligible to claim benefits under Section 80GG. For this, a person would be required to sign a rental agreement with their parents. Further, the amount conferred as rent will be taxable when the parents file their tax returns.
9. Non-resident Indians are also eligible to claim tax benefits under this provision. But, they should be handling rent for a property in India to implement the same.
How to File Form 10BA?
Form 10BA is necessary for individuals who want to gain tax benefits under Section 80GG. It is a declaration that you have taken a house on rent during the relevant period and also that you have no other residence. Here are a few of the details that a person has to fill in Form 10BA before submitting it:
1. Complete address with postal code
2. Name and PAN number of the assessee
3. Method of payment
4. Duration of residency in months
5. Rental cost
6. Name and address of the property owner
7. Declaration asserting that the assessee, his/her mate, or minor child do not possess any additional residential estate
8. PAN card number of the rented property's proprietor is compulsory if the cost of rent surpasses Rs.1 lakh in any provided fiscal year.
Where can one Get Form 10BA?
These forms are readily available from various sources, including the human resource department in any reputed organization. One can also obtain the form by visiting tax offices. However, the most convenient place to spot one is online. People can search for and download it from various official websites.
Deduction under Section 80GG of Income Tax Act
You can claim a deduction under section 80GG for the rent paid in the previous year (PY, taxable financial year) as per the terms of section 10(13A). Section 10(13A) limits the maximum eligible deduction under section 80GG to the least of the following:
a) Rs 5000 per month (Rs 60,000 per year)
b) Rent paid over 10% of the Adjusted Total Income for the PY
c) 25% of the Adjusted Total Income for the year
Adjusted Total Income for Section 80GG
Your Adjusted Total Income is the Gross Total Income for the previous year without the following incomes:
a) Long term capital gains (LTCG)
b) Short term capital gains (STCG)
c) All deductions from Gross Total Income (Section 80C to 80U) except section 80GG
d) Income received as NRI or from a foreign company taxable under sections 115A, 115AB, 115AC or 115AD
Example of Deduction under Section 80GG
Sammriddhi is a qualified beautician and owns a beauty salon in a posh locality in the south of Delhi. She has reported a gross total income of Rs 12 lakhs for the previous year. Out of her total taxable income Rs 50,000 is a long term capital gain and she has invested Rs 1 lakh in tax saving options.
She’s staying on rent near her saloon and pays Rs 15,000 p.m. as rent. She can claim deduction under section 80GG as per the following:
|Sammridhi's Gross Total Income||12,00,000|
|- Capital Gains||50,000|
|- Tax Saving Investments||1,00,000|
|Sammridhi's Adjusted Total Income (ATI)||10,50,000|
|The calculation for 80GG Deduction for Rent Paid|
|Total Rent Paid in the Year||1,80,000|
|A. Max Deduction for Monthly Rent @ Rs 5000 p.m.||60,000|
|B. Rent Paid over 10% of ATI||75,000|
|C. 25% of ATI||2,62,500|
|Max Deduction u/s 80GG (Lower of A, B & C)||60,000|
Since the lowest amount for Sammriddhi in Section 80GG estimate is Rs 60,000, she can claim it as a deduction for the rent paid on the house.
Exceptions in Section 80GG
Let's take a look at some exceptions under section 80GG:
a. You should not be the owner of a property (residential) in the area where you ordinarily live or conduct out work.
b. You will not avail of deductions if you are previously claiming deductions on residential property maintained in a different place. If you live in a city and own a property or house in some other city, you can't claim HRA deductions.
Information Required for Claiming Deduction under Section 80GG
You need to file form 10BA to claim deduction under section 80GG. This form is available on the income tax website or you can download it from any reliable online source. You will need to provide the following information on the form:
a) Your Name and Postal Address of your residence (rented house)
b) Your PAN
c) Your rental period details
d) Rent paid for the property and mode of payment, i.e., cash, check, bank transfer
e) Name and address of property owner
f) Landlord’s PAN details
g) A declaration that you do not own a property in your name or the name of your family members (spouse and minor children) or HUF
You can also fill out this form online while filing your return online.
How to Claim Deduction under Section 80GG for Property Owners?
If you own a property but living on rent, you can also claim a deduction under section 80GG when not receiving HRA. You need to meet the following two criteria for claiming deduction under section 80GG:
a) The property or properties you own are not in the same city as your current residence
b) You are paying rent on the present residential property
Section 80GG will not apply if you own a property in the same city as your current rented residence. If you own properties in other cities they will be considered let out for the financial year.
FAQs Related to Section 80GG
Adjusted total income is that part of your Gross Total Income for the financial year which excludes the following incomes:
a) Income received from a foreign company
b) Any income received as an NRI that is taxable at a special rate
c) Long-term capital gains of the financial year
d) Short-term capital gains that are taxable at 10% under section 111A
e) Deductions from gross total income under sections 80C to 80U except for 80GG
Yes, it applies to all categories of individual taxpayers including NRIs.
No, you cannot claim deduction under section 80GG if you are receiving a home rent allowance with the salary. Deduction under section 80GG is available only to those individual and HUF taxpayers who are either self-employed or not receiving HRA as part of the salary.
Paying rent for residential property allows you to avail of tax deductions either as HRA or under section 80GG. While deduction for HRA is available based on the allowance received and rent paid, section 80GG is available to you when you do not receive HRA but live on rent. Section 80GG deduction is limited to the minimum of the following three:
a) Rs 5000 per month or Rs 60,000 for the financial year
b) Rent paid over 10% of Adjusted Total Income
c) 25% of the Adjusted Total Income
Yes, you can claim a deduction under section 80GG while staying with your parents. However, you need to meet the following conditions:
a) There is a rent agreement between you and your parents
b) You are paying rent to your parents which they show as income in their ITRs for the relevant financial years
HRA or House Rent Allowance is a partially taxable allowance payable with salary. If you are receiving HRA and living on rent you can claim a part of HRA as a deduction in your ITR. The deduction amount will be limited to the minimum of the following three:
a) 50% of salary (40% in case of non-metro cities)
b) Rent paid over 10% of your salary
c) Amount of HRA received
Assessee is the legal term for the taxpayer. When you have earned an income in the previous year you need to file your tax return and deposit the applicable income tax. The ITR will help you assess your taxable income for the previous financial year. The officer who will verify and approve your assessment is called the assessor and you (the taxpayer) will be the assessee in the process.
No, both the benefits under HRA (section 10(13A)) and Section 80GG are mutually exclusive. This means you can claim either HRA or 80GG in one financial year.
How can we calculate adjusted gross income when the assessment is eligible for an 80G and an 80GG deduction?
You can calculate the Adjusted Gross Income after deducting amounts under both Sections 80G and 80GG. However, while calculating Adjusted Total Income for Section 80GG deduction you only need to deduct Section 80G deduction from your gross total income.