Section 80gg deduction

Section 80GG, a special provision under Chapter VI-A of the Income Tax Act, 1961, offers significant tax relief to individuals who pay rent but do not receive House Rent Allowance (HRA) from their employer. This deduction applies to both salaried and self-employed professionals, enabling them to claim financial relief on rental expenses. To qualify, individuals must reside in a rented property and ensure that HRA is not part of their monthly compensation. This 80GG tax-saving opportunity allows tenants to reduce their taxable income and make the most of this beneficial provision.

What is Section 80GG?

Section 80GG is a provision under the Income Tax Act that allows a taxpayer or an assessee to claim a deduction for the rent paid towards his/her accommodation. The deduction can be claimed by all individuals – salaried or self-employed, including those without any income. The provision helps individuals reduce their overall tax liability.

Who is Eligible for 80GG Deduction?

Self-Employed or Salaried Individuals: The deduction is available only to individuals who are either self-employed or salaried employees.
No Claim of HRA: The individual must not have received any House Rent Allowance (HRA) from their employer.
No Owned Residential Property: Neither the individual nor their spouse or minor child should own a residential property in the city where they reside, work, or conduct business.
No Spouse or Minor Child Ownership: If an individual’s spouse or minor child owns a residential property in the same city where the individual works, they are not eligible for the deduction.
No Parental Property: If the individual resides in a property owned by their parents and pays rent to them, they cannot claim the deduction.
Rent Paid for Accommodation: The deduction applies only to the rent paid towards accommodation, including payments for a furnished or unfurnished house, apartment, or flat.
Income Limit: While there is no specific income limit, the deduction is capped at a maximum of Rs. 5,000 per month or 25% of the individual’s total income, whichever is lower.
Declaration in Form 10BA: The individual must file Form 10BA with details such as rent paid, the landlord’s name and address, and the address of the rented property.
Proper Rent Receipts: Proper rent receipts must be maintained as evidence of rent payment. The receipts should include the landlord’s name, address, rent amount, and rental period.
Filing of Income Tax Return: The deduction can only be claimed if the individual files their income tax return within the due date specified under the Income Tax Act.

What Is the Total Amount Adjusted for Deduction Under Section 80GG?

The amount of deduction claimed under Section 80GG is subject to the following conditions:

The maximum deduction that can be claimed is Rs. 2,000 per month or 25% of the total income, whichever is less.
The rent paid should be in excess of 10% of the total income.

The term “total income” refers to the income earned by the assessee from all sources, including salary, business, and other sources.

Documents Required to Claim Section 80GG Deductions

Form 10BA: This form must be duly filled out and submitted to claim deductions under Section 80GG. It serves as a declaration of rent payments made by the taxpayer.
Landlord’s PAN: If the rent paid exceeds Rs. 1 lakh annually, the PAN details of the landlord must be provided.
Landlord’s Name and Address: The name and address of the landlord are necessary to establish the details of the rental agreement.
Payment Details: Documentation showing the payment method, the amount paid, and the tenure of the rental agreement must be provided to substantiate the claim.
Assessee’s Details: The PAN, name, and address of the assessee (the taxpayer) are also required to verify the claim.

How to File Form 10BA?

Details Contained in Form 10BA

The following details must be accurately filled to ensure the validity of your claim under Section 80GG.

Your name and PAN details.
Full address of your current residence.
Payment mode used for the rent.
Tenure of residency in months.
Rental amount paid during the tenure.
Property owner’s address.
Declaration that neither you nor any family member owns any other residential property.
Rented property owner’s PAN details (mandatory if rent exceeds ₹1 lakh annually).

How can Property Owners claim an 80GG Tax Deduction?

Property owners can claim deductions under Section 80GG by meeting the following criteria:

The property owner must pay rent for a home where they reside.
The property they own should not be located in the same town or region as their place of employment.

It is important to note that Section 80GG deductions are not applicable if the property owner chooses to live in a rental property despite owning a house in the same city.

FAQs

Can I claim a deduction under Section 80GG and HRA at the same time?

No, an individual cannot claim a deduction under Section 80GG and also claim HRA for the same period.

Is Section 80GG applicable to salaried individuals?

Any individual who pays rent for his/her accommodation but does not receive HRA from his/her employer can claim a deduction under Section 80GG. However, certain conditions must be fulfilled, such as not owning any residential property at the place of employment or business.

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