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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.
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
You need to meet certain conditions to be eligible for the deductions under Section 80GG. Here are those criteria –
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.
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.’
From the various options of forms, search for 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”
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.
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.
The amount of deduction can be the least of any of the following three -
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.
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 –
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.
You must file the necessary details to claim the 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:
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.
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.
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.
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
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).
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.
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 sections cannot be claimed by the assessee
If an assessee does not receive HRA, he can claim a rent deduction paid under section 80GG.
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.
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.
