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Section 80GG of Income Tax Act - Tax Claim Deduction For Rent Paid, Eligibility, Deductions & Calculation

Updated on: 16 Jan, 2024 05:49 PM

House rents can become a real burden, mainly in metropolitan cities where getting a house on rent is difficult. Since the demand for the rented house is so high, the rent skyrockets daily. However, if you are a salaried employee and receive HRA or have a home in the town, you may need not 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 that can be a savior for you. As per the Income Tax Act of 1961, section 80GG allows you to claim a deduction on yearly rent.

What is Section 80GG of Income Tax Act?

Section 80GG allows an individual to 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 the net taxable income on which the income tax would be charged


Who is eligible to claim deductions under Section 80GG?

You need to meet certain conditions to be eligible for the deductions under Section 80GG. Here are those criteria –

  • One can claim a deduction under this section if he or she is a self-employed or salaried person not having the HRA component in their CTC.
  • Companies cannot claim deductions under this section for their rental expenses. You being an individual, can only be entitled to receive this deduction.
  • If you are salaried, you must not receive any HRA or RFA benefits, and you are not entitled to receive so, to avail of the benefit of section 80GG.
  • You can claim deduction under this section on any kind of residential property which is unfurnished, furnished, or even semi-furnished where you stay as a tenant.
  • You, your spouse, your minor child, or the HUF of which you are a member – do not own any residential accommodation where you currently reside, perform office duties, or work or carry on business or profession.
  • No benefit under section 80GG will be allowed if you have any self-occupied house property.
  • Besides these assets, any other property you own would be called a capital asset, like land, building, shares, patents, trademarks, jewelry, etc.
  • Form 10BA is required to be filled with details of payment of rent to claim deduction under section 80GG.

How to file Form 10BA?

Form 10BA is the declaration required to be submitted while claiming benefits under section 80GG. It is a declaration that you have rented a house during the relevant period and 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.

How to file Form 10BA

Login to https://www.incometax.gov.in with your User ID, password, and captcha.

Now click on the tab named ‘e-File’ and select ’Income Tax Forms.’

How to file Form 10BA

From the various options of forms, search for Form 10BA.

How to file Form 10BA

Now select the Assessment Year for which Form 10BA is to be filed and click “Continue,” and on the next screen, click on “Let’s Get Started”

How to file Form 10BA

Provide details for each selection> Click on House Property Details> Enter the required details:-Address of the rented property, Name, and address of the Landlord, Details of Rent Paid, etc., and click Save.

How to file Form 10BA

Finally, click on declaration>select the check box> click Save.
Proceed further to e-verify> select mode of e-verification and Submit> Form 10BA will be filed and e-verified successfully.

How to file Form 10BA

How are deductions under Section 80GG calculated?

The amount of deduction can be the least of any of the following three -

  • Rs. 5000 per month or annually Rs. 60000
  • 25% of the adjusted total income of the individual
  • The amount derived after deducting 10% of the adjusted total income from the total rent paid in the financial year.
    Adjusted total income means Gross total income after reducing:
    • LTCG, if any, included in total gross income
    • STCG u/s 111A
    • All deductions u/s 80C to 80U except deduction under this section
    • Incomes of NRIs and foreign companies are taxed at a special tax rate, such as incomes u/s 115A, 115AB, 115AC, or 115AD.

Examples

Here is an example to understand the amount of deduction you can be entitled to in a better way.

Suppose your friend Samiksha earns having adjusted total income of 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 –
Rs. 60000 annually
25% of 500000 = Rs.125000
180000- (10% of 500000) = Rs.130000

So, the last of these three amounts is Rs. 60000. Your friend can claim and get a deduction of Rs. 60000 per year on the total gross income for the rent she pays.


Who can claim Deductions under Section 80GG?

A person who lives in a rented residential house and must be an individual not receiving any HRA from their employer can get the deduction.

Exceptions

There are certain cases where you cannot claim the deduction even if you meet the above-mentioned criteria –

  • You are the owner of a house in the city or the town where you are employed or doing your business (self-employment). Or own a house anywhere in India.
  • Those staying with their parents in the parental house cannot get a deduction under this section as they are not paying any rent.

The Trick So, you are living with your parents or relatives where you do not pay any rent but want to avail of 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 of the minimum deduction. However, the twist is your parents have to show the rent as their income from rent in their tax return.


How to claim deduction under Section 80GG?

You must file the necessary details to claim the deduction under section 80GG:-.

  • Your name
  • The address of the residential premise where you have been living on rent. You have to provide the full address with the postal code as well
  • Your PAN details
  • The tenure for which you are living in the rented property
  • Amount of rent and mode (through cash, bank deposit, etc.) of payment
  • The address and name of the owner of the house. (i.e., landlord).
  • A declaration in form 10BA that you do not own any residential property in your name or your spouse's name and even in the name of your minor child or HUF of which you are a member.

Documents Required for claiming deduction under section 80GG?

To claim a deduction under Section 80GG of the Income Tax Act, which pertains to the deduction for rent paid when HRA (House Rent Allowance) is not received, you will need the following documents:

  • Rent Receipts: You should have rent receipts for the rent paid during the financial year. The rent receipts should contain details such as the name and address of the landlord, the amount of rent paid, the period for which the rent was paid, and a revenue stamp (if applicable). Rent receipts must be provided for each month for which the rent was paid.
  • Rent Agreement: If you have a rent agreement or lease agreement with your landlord, it is advisable to keep a copy of the agreement. While it is not mandatory to submit the rent agreement, it can serve as supporting evidence if required by the tax authorities.
  • Declaration in Form 10BA: You may need to furnish a declaration in Form 10BA if the annual rent paid exceeds Rs. 1,00,000. Form 10BA is a declaration to claim the deduction for rent paid under Section 80GG.
  • PAN of the Landlord: If the annual rent exceeds Rs. 1,00,000, you will need to provide your landlord's Permanent Account Number (PAN). It is mandatory to furnish the PAN of the landlord in such cases.
  • Other Supporting Documents: While not mandatory, it is advisable to keep other supporting documents, such as bank statements or canceled checks that demonstrate the rent payments made to the landlord.

Summary

Under Section 80GG of the Indian Income Tax Act 1961, any individual (no Companies) can claim a deduction on the rent they pay for their accommodation. To claim the deduction, the person must be self-employed or salaried. And, in the salaried job, an 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.


Frequently Asked Questions

Q- What is Adjusted Total Income?

Adjusted Total income mentioned above can be described as the assessee's income in a year that 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 sections 115A, 115AB, 115AC, or 115AD. This income is after deducting any deduction from 80C to 80U before deducting the 80GG deduction.


Q- What is HRA?

HRA, or house rent allowance, is a benefit many salaried people get from their employers (especially those in government transferable jobs). This amount is for availing accommodation on rent in a city where you are employed and do not have a house. You can claim exemption of HRA amount under section 10 of the Income Tax Act subject to certain provisions.


Q- What is Financial Year?

It is a period of 12 months that is taken into account for calculating income and expenses in accounting and taxation. Here, in India, the financial year starts on the 1st of April and ends on the 31st of March


Q- What is Assessment Year?

The year following the financial year, in which you must pay the tax or the tax would be computed, is known as the 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).


Q- Who is an Assessee?

The person who files his or her income tax return for the income earned during a financial year 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 and he or she will be regarded as the assessee.


Q- What is the total rent referred to above?

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.

What is the total rent referred to above

Q- Can I claim both section 80GG and HRA under section 10(13A)?

No, Benefits under both sections cannot be claimed by the assessee


Q- Should I fill the HRA amount under section 80GG, as I haven't done that through the employer?

If an assessee does not receive HRA, he can claim a rent deduction paid under section 80GG.


Q- If HRA is exempted in my Form 16, can I still enter the actual rent paid under the 80GG form of ITR 1 filing?

No. assessee cannot claim under section 80GG if HRA has shown under Form16. Since he is receiving HRA and the individual receiving HRA or RFA is not eligible for claiming deduction under section 80GG.


Q- How can we calculate adjusted gross income when the assessment is eligible for an 80G and an 80GG deduction?

If the assessee has an eligible deduction from both sections 80G and 80GG, then an assessee can deduct anyone's deduction first as there is no law as per Income Tax Act on which needs to be deducted first.


CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.