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Section 80GG of Income Tax Act: Tax Deduction on Rent Paid

Team AckoNov 7, 2024

Out of the many tax saving options available in the old tax regime, claiming under Section 80GG is arguably the easiest. This section allows you to save tax on the rent paid by you throughout the financial year. The following article explains Section 80GG in detail. Take a look.

Contents

What is Section 80GG of the Income Tax Act?
Eligibility criteria for claiming deduction under Section 80GG
Documents required for claiming deduction under Section 80GG
How to claim deduction under Section 80GG
How to Fill Form 10BA?
- Who can claim deduction under Section 80G
Example of claiming deduction under Section 80GG
Frequently asked questions

What is Section 80GG of the Income Tax Act?

Section 80GG of the Income Tax Act is a provision that allows individual taxpayers to claim a deduction for the rent paid for a residential accommodation if they do not receive House Rent Allowance (HRA) from their employer. This deduction is available to all individual taxpayers, including self-employed individuals and salaried individuals who do not receive HRA.

Eligibility criteria for claiming deduction under Section 80GG

The eligibility criteria for claiming a deduction under Section 80GG of the Income Tax Act are as follows.

The taxpayer should be an individual: Section 80GG deduction is available only to individual taxpayers who are not receiving House Rent Allowance (HRA) from their employer.
The taxpayer should not own any residential property: To claim the deduction, the taxpayer, their spouse, or minor child should not own any residential property in the city or town where the taxpayer is employed.
The taxpayer should be paying rent: The taxpayer should be paying rent for the residential accommodation they occupy for their own residence.
The taxpayer should not have claimed HRA: The taxpayer should not have claimed any deduction for the rent paid under any other provision of the Income Tax Act.
The taxpayer should not have income from self-occupied property: If the taxpayer has any income from a self-occupied property, such as rental income or deemed rental income, they will not be eligible to claim a deduction under Section 80GG.

The taxpayer should file Income Tax Return: The taxpayer should file their income tax return and should report the deduction claimed under Section 80GG in their return.

Documents required for claiming deduction under Section 80GG

The following documents might be required for claiming a deduction under Section 80GG of the Income Tax Act.

Document	Description
Rent receipts	The taxpayer needs to obtain rent receipts from their landlord, showing the amount of rent paid during the financial year.
Rent agreement	If the taxpayer has entered into a rent agreement with their landlord, they should keep a copy of the agreement as proof of their tenancy.
Declaration form	The taxpayer needs to fill and submit a declaration in Form 10BA, which is a self-declaration stating that they meet the eligibility criteria for claiming a deduction under Section 80GG.
Proof of payment	The taxpayer should also maintain proof of payment of rent, such as bank statements or cancelled cheques, to substantiate the rent payment.
PAN of landlord	If the rent paid during the financial year exceeds Rs. 1,00,000, the taxpayer is required to provide the Permanent Account Number (PAN) of their landlord.

How to claim deduction under Section 80GG

Here are the steps to follow when making a claim under Section 80GG of the Income Tax Act.

1. Check eligibility

The taxpayer should ensure that they meet all the eligibility criteria for claiming a deduction under Section 80GG.

2. Obtain rent receipts

The taxpayer should obtain rent receipts from their landlord for the rent paid during the financial year.

3. Fill declaration form

The taxpayer needs to fill and submit Form 10BA, which is a self-declaration stating that they meet the eligibility criteria for claiming a deduction under Section 80GG.

4. Calculate deduction amount

The taxpayer needs to calculate the deduction amount based on the least of the following.

Rs. 5,000 per month
25% of the taxpayer's total income for the year
The actual amount of rent paid minus 10% of the taxpayer's total income for the year

5. Claim deduction in income tax return

The taxpayer should claim the deduction under Section 80GG in their income tax return by filling in the relevant details in the appropriate section.

6. Submit income tax return

The taxpayer should file their income tax return within the due date specified by the Income Tax Department.

How to Fill Form 10BA?

The following details need to be filled in 10BA:

Name and PAN of the individual
Complete address of the individual
Tenure and rent amount
Rent payment mode
Name and address of the landlord
PAN of the landlord (Rental above INR 1 lakh)
A declaration that no other house/property is owned by the individual, his spouse/minor child or the HUF of which he is a member of.

Who can claim deduction under Section 80G

Individuals paying rent for the property they are living in.
Individuals who do not own property in the same city or location as their workplace.

Example of claiming deduction under Section 80GG

Consider Mr. Rajiv is a 45-year-old self-employed individual who does not receive HRA from his employer. He pays a monthly rent of Rs. 10,000 for his rented house. His annual income is Rs. 7,50,000.

In this case, Mr. Rajiv can claim a deduction under Section 80GG for the rent paid towards his residence. The deduction that can be claimed under this section is the least of the following three amounts.

Rent paid minus 10% of the total income
Rs. 5,000 per month (i.e., Rs. 60,000 per annum)
25% of the total income

The following table helps calculate the deduction that Mr. Rajiv can claim under Section 80GG.

Description	Calculation	Total
Rent paid	Rs. 10,000 x 12 months	Rs. 1,20,000
Minimum limit of Rs. 5000 per month	Rs. 5,000 x 12 months	Rs. 60,000
Rent paid minus 10% of total income	1,20,000 - 75,000 (10% of 7,50,000)	Rs. 45,000
25% of total income	25% of Rs. 7,50,000	Rs. 1,87,500

Out of the above three conditions, the minimum amount that can be claimed as a deduction is Rs. 45,000 (i.e. Rent paid minus 10% of total income). Therefore, Mr. Rajiv can claim a deduction of Rs. 45,000 under Section 80GG.

Frequently asked questions

Here are some common questions and answers about Section 80GG House Rent Allowance.

How to get Form 10BA?

They can download the form from the Income Tax Dept's official website or ask the Human Resource Dept of their organization.

Can a self-employed individual claim a deduction under Section 80GG?

Yes, a self-employed individual can claim a deduction under Section 80GG if they are not receiving HRA from their employer and meet all the other eligibility criteria.

Can a taxpayer claim a deduction under Section 80GG for rent paid for a commercial property?

No, Section 80GG is applicable only for rent paid for residential accommodation.

Is there any limit on the amount of rent that can be claimed for deduction under Section 80GG?

There is no limit on the amount of rent that can be claimed for deduction under Section 80GG. However, the deduction amount is restricted to the least of the three criteria mentioned earlier.

Can a taxpayer claim a deduction under both Section 80GG and HRA?

No, a taxpayer cannot claim a deduction under both Section 80GG and HRA. Section 80GG is only applicable when the taxpayer is not receiving HRA from their employer.

Can a taxpayer claim a deduction under Section 80GG if they own a residential property in another city?

No, if the taxpayer or their spouse or minor child owns any residential property in any other place, they will not be eligible to claim a deduction under Section 80GG.

Can a taxpayer claim deduction under Section 80GG for rent paid to a relative?

No, a taxpayer cannot claim deduction under Section 80GG for rent paid to a spouse, parents, or any other relative. However, a taxpayer can claim deduction under Section 80GG for rent paid to an unrelated landlord.