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What is Section 80GG as per Income Tax Act?

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.


Conditions to claim deduction under Section 80GG?

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

  • One can claim deduction under this section if he or she is self-employed or salaried person not having the HRA component in his CTC.
  • Companies cannot claim deduction 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 receiving any HRA or RFA benefits and you are not even entitled to receive so, to avail 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.
  • If the taxpayer gets any kind of similar deduction in that assessment year, then he or she cannot get deduction under this 80GG section.

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.


How to claim deduction under Section 80GG?

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.


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 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.

  • Login to https://incometaxindiaefiling.gov.in/ with your User ID, password and captcha. figures
  • Now click on the tab named ‘e-File’ and select ’Income Tax Forms’. figures
  • The screen shall appear as below. From the 1st drop down select Form 10BA. figures
  • Now select the Assessment Year for which Form 10BA is to be filed and fill the submission mode as "Prepare and submit online." figures
  • Now when you will click on continue, the Form 10 BA screen shall appear as below. You may read the instructions on how to file Form 10BA given in the 1st blue tab and then enter the relevant information by clicking on other blue tabs and submit. figures

What will be the quantum of deduction under section 80GG?

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
  • Amount derived after deducting 10% of the adjusted total income from the amount of total rent paid in the financial year.
  • Adjusted total income means Gross total income after reducing:
    1. LTCG if any, included in gross total income
    2. STCG u/s 111A
    3. All deductions u/s 80C to 80U except deduction under this section
    4. Incomes of NRIs and foreign companies, etc. which are taxed at special rate of tax such as incomes u/s 115A, 115AB, 115AC or 115AD.

Examples

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 –

  • Rs. 60000 annually
  • 25% of 500000 = Rs.125000
  • 180000- (10% of 500000) = Rs.130000

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.


Who can claim Deductions under this section?

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.

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).
  • For them who are staying with their parents in the parental house, cannot get deduction under this section as they are not paying any rent.

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.


What is the information required for claiming deduction under section 80GG?

To claim the deduction under section 80GG, you need to file the necessary details.

  • 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).
  • (No such information required while filing Form-10BA online on IT site)
  • A declaration that you do not own any residential property on your name or your spouse name and even on the name of your minor child or HUF of which you are a member.

Summary

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.


Frequently Asked Questions

Q- What is Adjusted Total Income?

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.


Q- What is HRA?

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.


Q- What is Financial Year?

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.


Q- What is Assessment 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).


Q- Who is an Assessee?

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.


Q- What is total rent referred 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.

Deduction-where-House-rent-is-paid-and-HRA-not-received

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

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


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

Ans: If an assessee not receiving HRA than he can claim a deduction of rent 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?

Ans: 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.


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

Ans. 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.


Q- Is Section 80GG eligible if we are filing taxes under 44ADA?

Ans: Yes. Assessee can claim deduction u/s 80GG.


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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.