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What it is, tax benefit, how to claim, quantum, how to file Form 10E, eligibility etc for FY 2020-21(AY 2021-22) & FY 2019-20(AY 2020-21)
House rents can become a real burden mainly in the metropolitan cities where getting a house on rent is difficult. Since the demand for the rented house is so high, the rent also skyrockets with every passing day. However, if you are a salaried employee and receive HRA or you have your own home in the town, you may need not to worry. But, for those who have to rent a house but do not receive HRA (House Rent Allowance), it may hurt their monthly income. However, there is a provision in the Income Tax Act, which can be a savior for you. As per Income Tax Act,1961, section 80GG allows you to claim a deduction on the amount of rent you pay every year.
80GG is a section in the Income Tax Act of India, under which an individual can claim a deduction on the rent that is paid towards a furnished or unfurnished house. The house must be in use for their residential accommodation.
By deductions, here we mean the amount you can deduct from your gross income of the year to derive at the net taxable income on which the income tax would be charged.
There are certain conditions which you need to meet to be eligible for the deductions under Section 80GG. Here are those criteria –
You or your spouse or your minor child or HUF of which you are a member – do not own any residential accommodation at the place where you currently reside, perform duties of the office, or employment or carry on business or profession.
In case you have nay self occupied house property no benefit under section 80GG will be allowed.
Besides these assets, any other property that you own would be called a capital asset like land, building, shares, patents, trademarks, jewellery, etc.
For filing a valid claim under section 80GG you are required to submit Form 10BA online. Along with that you need to claim it in the income tax return filed.
Form 10BA is the declaration required to be submitted while claiming 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. Since Form 10BA is required to be furnished while claiming deduction under section 80GG. Lets us understand the step by step procedure of furnishing this form online.
The amount of deduction can be the least of any of the following three -
For understanding the amount of deduction that you can be entitled to in a better way, here is an example.
Suppose, your friend Samiksha is earning Rs. 5 lakh p.a. She lives in Mumbai in a rented apartment and pays a rent of Rs.15000 per month. So, her total rent per year is Rs. 180000. Now, as per the above-mentioned criteria, the three possibilities can be –
So, the least of this three amount is Rs. 60000. So your friend can claim and get a deduction of Rs. 60000 per year on the gross total income for the rent she pays.
A person who lives in a rented residential house and she or he must be an individual not receiving any HRA from their employer can get the deduction.
There are certain cases where you cannot claim the deduction even if you meet the above-mentioned criteria –
The Trick So, you are living with your parents or any other relative where you do not pay any rent but want to avail the deduction under 80GG. In that case, you need to pay the rent to your parents or relative at least on paper that is you need to have the receipts of rent payment to avail the minimum deduction. However, the twist is your parents have to show the rent as their income from rent in their tax return.
To claim the deduction under section 80GG, you need to file the necessary details.
Under Section 80GG of the Indian Income Tax Act 1961, any individual (no Companies) can claim a deduction on the amount of rent they pay for their accommodation. To claim the deduction the person must be self-employed or salaried. And, in the salaried job, individual must not be entitled to receive any HRA (for that assessment year). The least of Rs. 60000 per year or 25% of the adjusted total income in a year or the amount calculated by deducting 10% of the adjusted total income from the total rent paid in a year can be claimed as the deduction. The assessee must not own any residential property on his or her name and not even on family members like a spouse or minor child’s name or HUF of which he/she is a member, otherwise, they cannot be entitled to receive any deduction under this section.
Adjusted Total income mentioned above can be described as the income of the assessee in a year which does not include any long term capital gains or short term capital gains in it (u/s 111A) and any other incomes which fall under section 115A , 115AB, 115AC or 115AD. This income is after deducting any deduction from 80C to 80U and obviously before deducting the 80GG deduction.
HRA or house rent allowance is a benefit that many salaried people get from their employers (especially the ones who are in government transferable job). This amount is for availing accommodation on rent in a city where you are employed and you do not have your own house. You can claim exemption of HRA amount under section 10 of the Income Tax Act subject to certain provisions.
It is a period of 12 months which is taken into account for the calculation of income and expenses in accounting and for taxation purpose. Here, in India, the financial year starts from 1st of April and ends on 31st of March next year.
The year following the financial year, in which you have to pay the tax or the tax would be computed is known as Assessment year. For example, If the financial year is from 1st April 2019 to 31st March 2020 (FY 2019-20). The assessment year would be 1st April 2020 to 31st March 2021 (AY 2020-21).
The person who files his or her income tax return for assessment in the assessment year is known as an assessee. Here the person who will be claiming the deduction under section 80GG, have to file the income tax return for tax assessment purpose and he or she will be regarded as the assessee.
The amount you have paid for the residential property you are living on rent, in the relevant financial year is your total rent paid. For example, your rent is Rs. 10000 per month, so the total rent for the financial year would be Rs. 120000.
No, Benefits under both the sections cannot be claimed by the assessee
If an assessee not receiving HRA than he can claim a deduction of rent paid under section 80GG.
No. assessee cannot make claim under section 80GG if HRA shown under Form16. Since he is receiving HRA and the individual receiving HRA or RFA is not eligible for claiming deduction under section 80GG.
If the assessee has eligible deduction from both the section 80G and 80GG,then an assessee can deduct anyone deduction first as there is no law as per Income Tax Act on which needs to be deducted first.
Yes. Assessee can claim deduction u/s 80GG.
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