Section 80GG of Income Tax

The Section 80GG rule of the Income Tax Act, 1961, is a specific provision that allows individuals residing in rented properties the benefit of tax deductions or claim relief if they do not receive HRA as part of their salary package.

HRA, or House Rent Allowance, is a common salary division head, offered by many organisations. It helps individuals or employees living in rented accommodation manage their financial expenses better.

However, if employees do not receive HRA even with a rental accommodation, they can claim valid tax deductions as part of the 80GG tax exemption clause.

For example, Ramesh, a self-employed consultant, lives in rented accommodation and pays ₹12,000 per month as rent. He does not receive HRA from his earnings and does not own a house at his workplace. Under Section 80GG, he can claim a deduction calculated as the least of the following:

• ₹5,000 per month (₹60,000 annually)
• 25% of his total annual income after other deductions
• Rent paid minus 10% of his adjusted total income

If Ramesh’s adjusted annual income is ₹6,00,000, his deduction under Section 80GG would be ₹60,000, providing substantial tax relief.

To claim deductions under Section 80GG of the Income Tax Act, individuals must meet the following criteria:

• Applicant: The taxpayer must be an individual or HUF and file for individual tax returns. Moreover, they need to be either salaried employees or a self-employed individual.
• No House Rent Allowance (HRA): The taxpayer should not receive HTA as part of their salary.
• Rental Payment: The taxpayer must pay rent for residential accommodation.
• No Ownership at Workplace Location: The individual, their spouse, minor child or HUF should not own a house at the place of employment or business.
• No Ownership of Self-Occupied Property: The taxpayer should not own a self-occupied residential property in any other location.
• Form 10BA Submission: A declaration confirming the non-ownership of residential property and compliance with the conditions must be submitted in Form 10BA.
• Income Source: The deduction is available to both salaried and self-employed individuals.
• Computation Basis: The rent deduction is calculated as the least of ₹5,000 per month (₹60,000 annually), 25% of total income (post-deductions) or actual rent minus 10% of total income.
• PAN Card Requirement: If the rent for the year is more than ₹1 lakh, the taxpayer must submit a copy of their PAN card.
• Agreement with Parents: If the taxpayer stays at the house owned by parents, they must have a valid rental agreement with their parents to claim deductions.

These conditions ensure that Section 80GG benefits those genuinely in need of financial relief for rental expenses.

It is mandatory to choose one of the three scenarios below based on the least amount for the section 80GG of the income tax act limit.

The rent payout should be under the 80GG maximum limit of ₹5000/ month or ₹60,000/ year

OR

The amount of rent claimable for deduction under this section needs to be equivalent to the total rent paid minus a 10% subtraction of the total income received

OR

25% of the annual income

The deduction is capped at ₹60,000, being the lowest value among the three.

Exceptions

Certain circumstances do not qualify for deductions under Section 80GG:

• If the taxpayer or their family owns a house at the work location.
• If HRA is received as part of the salary package.
• If Form 10BA is not submitted as required by the Income Tax Department.
• For rent paid for non-residential purposes, such as office or commercial space.

By understanding these limits and exceptions, taxpayers can optimise their financial planning effectively.

Section 80GG allows deductions for rent paid by individuals not receiving HRA. The deduction is the least of the following:

• ₹5,000 per month (₹60,000 annually).
• 25% of Adjusted Total Income (AGTI): AGTI is calculated by reducing specific deductions (e.g., under Section 80C to 80U) from the gross total income.
• Rent Paid Minus 10% of AGTI: The difference between the actual rent paid and 10% of AGTI.

Critical Aspects Considered:

• Adjusted Total Income: This refers to gross income minus deductions under Section 80C to 80U (except 80GG).
• Rent Paid: Only rent for residential accommodation is considered.
• No HRA Component: If HRA is received, deductions under Section 80GG cannot be claimed.
• Submission of Form 10BA: This declaration ensures compliance with eligibility criteria.

Let us understand with the following example, where three situations where individuals have different incomes and rent amounts:

In this example:

• Person A claims ₹36,000 (lowest value).
• Persons B and C claim ₹60,000, the cap limit.

Alternatively, you use an online section 80GG of income tax act calculator from a trusted provider and determine the deductions instantly.

To claim deductions under section 80GG of the Income Tax Act, follow these steps:

• Check Eligibility: Ensure you meet all the criteria, including not receiving HRA and having no ownership of residential property.
• Calculate Deduction: Use the prescribed limits to determine the deduction amount.
• Fill Out Form 10BA: Submit this form as a declaration that you satisfy all eligibility conditions.
• Keep Supporting Documents: Maintain rent receipts, rental agreements, and Form 10BA as proof.
• File Your ITR: Include the claimed deduction in your Income Tax Return (ITR) filing under the applicable section.

Proper documentation is essential for a hassle-free claim process.

Property owners who do not receive HRA (House Rent Allowance) can still claim deductions under Section 80GG of the Income Tax Act. This section provides relief for individuals paying rent while not owning residential property in the same city of employment.

To claim this deduction under section 80GG of the Income Tax Act:

• Ensure you meet the eligibility criteria, including not owning a residential property in the city of residence or work.
• File Form 10BA to declare that you meet the prescribed conditions.
• Calculate the deductible amount using the formula under Section 80GG: the least of ₹5,000 per month, 25% of total income, or actual rent paid minus 10% of total income.
• Attach necessary documents, such as rent receipts and Form 10BA, when filing your tax returns.

By leveraging this provision, property owners paying rent can effectively reduce their taxable income, provided they meet the specified conditions and retain proper documentation.

Form 10BA is a declaration required to claim tax deductions under Section 80GG. Here’s how to file it:

• Access the Form Online: Log in to the Income Tax e-Filing portal and select Form 10BA from the menu.
• Provide Personal Details: Enter details like your name, PAN, and address.
• Declare Compliance: Confirm you meet Section 80GG’s eligibility, such as not receiving HRA or owning a house.
• Mention Rent Details: Provide the name and address of the landlord, rent paid, and rental period.
• Submit the Form: Validate and e-verify the form for final submission.

Filing Form 10BA is mandatory to claim this deduction. Always double-check details to avoid discrepancies during filing.

To claim Section 80GG deductions, you need:

• Form 10BA: A declaration of eligibility.
• Rent Receipts: Ensure the landlord’s name, address and rent amount are mentioned.
• Rental Agreement: For proof of the tenancy.
• PAN of Landlord: Mandatory if the rent exceeds ₹1 lakh annually.
• Income Proof: Salary slips, Form 16 or other relevant documents.
• ITR Filing Acknowledgment: Include the deduction claim in your return.

Maintaining these documents ensures the smooth processing of claims.

Taxpayers in India have several avenues to legally reduce their taxable income. Here are some popular options:

• Investments in Section 80C Instruments: Investments up to ₹1.5 lakh in instruments like Public Provident Fund (PPF), Employees’ Provident Fund (EPF), National Savings Certificates (NSC) and tax-saving fixed deposits qualify for deductions.
• Health Insurance Premiums (Section 80D): You can claim up to ₹25,000 for premiums paid for yourself, spouse and children for medical insurance. For senior citizen parents, the deduction increases to ₹50,000.
• Education Loan (Section 80E): Interest paid on education loans for higher studies qualifies for deductions without any upper limit.
• Donations (Section 80G): Contributions to certain charitable organisations and relief funds are eligible for a deduction of up to 100% or 50% of the donated amount.
• Home Loan Deductions: Claim up to ₹2 lakh on home loan interest under Section 24(b) and up to ₹1.5 lakh on the principal under Section 80C.
• Savings Account Interest (Section 80TTA): Interest income up to ₹10,000 is deductible for individuals and Hindu Undivided Families (HUFs).
• NPS Contributions (Section 80CCD): Contributions to the National Pension Scheme qualify for an additional deduction of ₹50,000 beyond the ₹1.5 lakh limit under Section 80C.

These provisions help taxpayers save significantly and encourage responsible financial practices.

For all salaried employees and self-employed individuals, tax deduction under section 80GG of the Income Tax Act is beneficial as it reduces the tax liability by a significant margin. If you pay rent but do not receive any HRA from your employer, you can easily file for tax deduction under this section.

It is necessary to have the correct information and cross-check eligibility criteria to ensure no rejection under this provision. Moreover, always calculate the deduction value using the above-mentioned method or the Section 80GG of the Income Tax Act calculator online.

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