Act Income Tax

Section 80GG of Income Tax Act and Deductions in Respect of Rent Paid, Conditions & Eligibility

Section 80GG of Income Tax Act and Deductions in Respect of Rent Paid, Conditions & Eligibility

Section 80GG is a provision under Chapter VI-A of the Income Tax Act 1961. It provides tax reprieve to those who do not avail of house rent allowance. To become eligible for tax deduction under section 80GG, an individual must reside in a rented property. In addition to this, his employer should not provide a home rent allowance (HRA) as a part of monthly compensation. Section 80GG deduction applies to eligible salaried and self-employed professionals. Thus, if an individual is operating a business, he or she can claim this tax deduction as the salaried counterparts.

Who is Eligible to Claim Tax Deductions under Section 80GG?

One must meet certain conditions to avail of tax deductions under this specific section of the Income Tax Act. Below are some of the factors that an individual must fulfil to claim a deduction under section 80GG.

  1. Only individuals and Hindu Undivided Families are eligible to claim these tax deductions. Businesses or other enterprises cannot avail of the same tax discounts upon paying rent in a given fiscal year.
  2. Either salaried professionals or self-employed can take advantage of this provision. If one has no income, he or she is disqualified from obtaining benefits under section 80GG, even if he/she pays rent.
  3. Those willing to obtain this tax rebate must submit a duly filled Form 10BA to the government. Form 10BA declares that the individual filing it does not claim to benefit from a self-occupied property in any location.
  4. Section 80GG of the Income Tax is specifically designed for those who do not receive home rent allowance from their employers. If an individual’s salary includes HRA payment, he/she becomes ineligible to claim income tax rebates related to housing rent.
  5. If a yearly rent amount exceeds INR 1 lakh, the taxpayer has to submit a copy of the homeowner’s PAN card to claim tax benefits under Section 80GG of the Income Tax Act. Remember that the PAN Card1 must belong to the property owner where one resides on rent.
  6. An individual must not have claimed HRA at any time during the fiscal year for which he/she claims the tax benefit under Section 80GG. This is crucial for those who have changed employers in the last year.
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Even if one does not receive HRA for a major part of the year, getting the same for just a month disqualifies one from claiming this yearly reprieve.

Individuals staying with their parents in a property owned by their parents can also claim Section 80GG benefits. To do this, one needs to sign a rental agreement with parents. Further, the amount shown as rent will be taxable in the hands of the parents when they file their yearly taxes. Non-resident Indians can also claim tax benefits under this provision. For non-resident Indians to claim this benefit, they must pay rent for a property in India.

How are Deductions under Section 80GG Calculated?

The deduction limit and tax deduction under section 80GG are based on Tax Rule 2A. As provided under section 10(13A), the least amount of the following calculations is considered a non-taxable income.

  • INR 5,000 per month or INR 60,000 a year.
  • 10% of the taxpayer’s adjusted total income is deducted from the yearly rent amount.
  • 25% of the adjusted total income for a year.

After calculating the three figures for an individual, the least from then is considered the applicable deduction under section 80GG. The Table below depicts the two distinct tax deductions based on different income and rent payments.

FactorsIndividual AIndividual B
Adjusted Total Income (ATI)INR 200,000INR 180000
Total Yearly Rent PayableINR 80000INR 60000
Deductions under Section 80GG of the Income Tax Act
Yearly Rent – 10% of the ATIINR 60,000INR 42,000
25% of ATIINR 50,000INR 45,000
INR 5000 per monthINR 60,000INR 60,0000
Deductions
 INR 50,000INR 42,000

One can clearly understand from this table that Individual A is supposed to receive higher tax deductions under Section 80GG because his adjusted total income is greater than that of Individual B. Further, the part where 25% of the ATI is considered as a tax discount is applicable in the first case since the quantum in this calculation is lower than the other two clauses. However, in individual B’s case, 10% of ATI is deducted from yearly rent to give a lower quantum than other calculations. Thus, it is an applicable tax deduction for individual B.

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Filling Form 10BA

Form 10BA is crucial for anyone seeking tax benefits under section 80GG. Some of the details that one must fill in before submitting Form 10BA are:-

  1. Complete address with postal code
  2. Name and PAN of the assessee
  3. Mode of Payment
  4. Tenure of residency in months
  5. Rental amount
  6. Address and name of the property owner
  7. Declaration stating that the assessee, his/her spouse or minor child do not own any other residential property
  8. The PAN number of the rented property’s owner is mandatory if the amount of rent exceeds INR 1 lakh in any given financial year.

How to file Form 10BA?

Form 10BA is a declaration required to be submitted while claiming benefits under section 80GG. This is a declaration that the house was rented during the relevant period and that he should not have any other residence. Since submitting Form 10BA while claiming a deduction under Section 80GG is necessary, let’s understand how to furnish this form online.

Step 1: Log in to https://www.incometax.gov.in/iec/foportal/ with your User ID, password and captcha.

Step 2: Click on the e-file tab and select ‘Income Tax Forms’.

Income Tax Forms

Step 3: From various options of form, select Form 10BA.

select Form 10BA

Step 4: Select the Assessment year for which Form 10BA is to be filled and click ‘Continue’.

Step 5: On the next screen, click on “Let’s Get Started.”

On the next screen, click on Let's Get Started.

Step 6: Provide details for each selection. Click on House Property Details and Enter the required details, such as the address of the rented property, details of the Landlord, details of rent paid, etc. and click save.

Click on House Property Details

Step 7: Lastly, click on the declaration, select the check box and click save.

Step 8: Proceed to e-verify, then select the manner in which you want to e-verify and submit. Form 10BA will be filed and e-verified successfully.

From where can this form be accessed?

These forms are easily available from a variety of sources, such as the Human Resource Department of any reputed organization. It can also be acquired from tax officers. Individuals can also access it online. They can search for and download it from various official websites.

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How can Property Owners Claim Tax Deductions under Section 80GG?

Property Owners can claim deduction under section 80GG if they satisfy two major criteria:-

  1. They must be paying rent on a property where they currently reside
  2. The property(s) owned should be in the same city or location as their workplace. If they own a property within the city but decide to live in a rented property, the deduction under section 80GG does not apply to their yearly income taxes.

Property can be owned in different cities or locations, while they can claim the rent benefits only if it is in the city where they work. In such a case, the owned property is considered to be let out.

Documents Required

Form 10BA has to be submitted along with the following information:-

  1. Assessee’s name, PAN and full address.
  2. Tenure, amount and form of payment are all important considerations.
  3. A declaration that no other dwelling property is owned by the assessee, his spouse or the HUF to which he belongs.
  4. The landlord’s name and address
  5. The landlord’s PAN is required if the rent exceeds INR 1 lakh.

Conclusion

Under Section 80GG of the Income Tax Act, 1961, any individual can claim a deduction on rent they pay for their accommodation. To claim this deduction, the person must be self-employed or salaried. Further, the salaried person must not be entitled to receive  HTA. A minimum of Rs 60,000 per year or 25% of the adjusted total income in a year or an amount calculated by deducting 10% of the adjusted total income from the total rent paid in a year can be claimed as a deduction. The taxpayer must not own any residential property, and even his family members, such as a spouse or minor child or HUF of which he/she is a member, should not be a property; otherwise, they become disentitled to receive any deduction under this section.

FAQs

  1. Who is eligible for an 80GG deduction?

    An Individual residing in a rented property is to be eligible for an 80GG deduction

  2. Who is eligible to claim a deduction under section 80GG?

    Salaried and self-employed professionals are eligible to claim a deduction under section 80GG.

  3. Can I claim 80GG without proof?

    No, to claim deduction under section 80GG, you will need the following documents: i) rent receipts, ii) rent agreement, iii) Declaration in Form 10BA, iv) PAN of the Landlord and v) Other Supporting Documents.

  4. What is the limit of 80GG rent paid deduction?

    The limit for 80GG rent paid deduction is INR 60,000 per annum in case you do not receive HRA at any time in a relevant financial year.

  5. How much can I claim under 80GG?

    Yes, one can claim a deduction under section 80GG of up to INR 60,000 per annum in case you do not receive HRA at any time in a relevant financial year.

  6. Can I claim both HRA and 80GG?

    No, you cannot claim a deduction under section 80GG if you are claiming HRA.

  7. Can I claim both 80GG and section 24?

    No, you cannot claim a deduction under section 80GG if you are claiming a deduction under section 24.

References

  1. https://incometaxindia.gov.in/Pages/tax-services/apply-for-pan.aspx

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