Section 80GG

What is section 80GG in income tax

Section 80GG of the Income Tax Act in India provides for deductions related to house rent paid by individuals who do not receive house rent allowance (HRA) as part of their salary. This section is applicable for taxpayers who are either salaried or self-employed and do not receive HRA but incur expenses on rent for their accommodation.

Here are the key provisions and conditions under Section 80GG:

1. Eligibility criteria:

• Individuals who do not receive HRA can claim deductions under section 80gg, subject to certain conditions.

2. Conditions for claiming deduction:

• The taxpayer, spouse, or minor child should not own a residential accommodation in the city or town where they work or carry on their business or profession.

3. Rent payment criteria:

• The taxpayer should be paying rent for the accommodation they reside in. The deduction is available for the rent actually paid minus 10% of the total income and after deducting HRA, if any.

4. Amount of deduction:

The deduction allowable under section 80gg is the least of the following:

• Rent paid minus 10% of the total income.
• Rs. 5,000 per month.
• 25% of the total income.

5. Declaration by the taxpayer:

• To claim the deduction, the taxpayer needs to file form 10ba along with the income tax return. In form 10ba, the taxpayer needs to provide details of the rent paid, the landlord's name, and address.

6. Submission of rent receipts:

• It is advisable to keep rent receipts as supporting documents in case the income tax department seeks verification.

You can also use our income tax calculator to calculate your income tax.

The Income Tax Act of India offers various provisions for taxpayers to avail of deductions and reduce their taxable income. One such provision is Section 80GG, which pertains to the deduction for rent paid. This section is especially beneficial for individuals who do not receive House Rent Allowance (HRA) from their employers but still incur rental expenses.

Who is eligible to claim tax deductions under Section 80GG

Individuals who meet the following criteria are eligible to claim deductions under Section 80GG:

1. Absence of HRA: The foremost criterion for eligibility is that the taxpayer should not be receiving House Rent Allowance as part of their salary. This is often the case for individuals who are self-employed or work for employers not offering HRA.
2. House ownership restrictions: The taxpayer, their spouse, or minor child should not own a house in the city where they work or carry-on business. This stipulation ensures that the deduction is targeted toward those genuinely incurring rental expenses.
3. No other property ownership: Another critical criterion is that the taxpayer should not own a house in any other location, even if they are earning income from that property. This reinforces the intent of the provision to benefit those who are primarily reliant on rented accommodations.

How are deductions under Section 80GG calculated

The deduction under Section 80GG is the least of the following amounts:

1. Rent paid minus 10% of adjusted total income: The adjusted total income is a crucial factor, calculated by reducing deductions under Sections 80C to 80U (except 80GG) and excluding long-term capital gains. This ensures that the deduction is proportionate to the taxpayer's overall financial position.
2. Rs. 5,000 per month: Irrespective of the actual rent paid, the maximum deduction allowed is capped at Rs. 5,000 per month. This provides a standardised benefit, especially for individuals with lower rental expenses.
3. 25% of total adjusted income: Calculated as 25% of the total income before allowing deductions under Section 80GG, this parameter ensures that the deduction is a reasonable proportion of the taxpayer's overall income.

How can property owners claim tax deductions under section 80GG?

Property owners can claim tax deductions under Section 80GG for rent paid if they do not receive House Rent Allowance (HRA). To be eligible, the individual must be self-employed or a salaried employee without HRA benefits. The deduction amount is the least of:

1. Rs. 5,000 per month.
2. 25% of total annual income.
3. Rent paid minus 10% of total income.

Documents Required to claim tax deductions under section 80GG

1. Form 10BA: A declaration that you don’t own any residential property.
2. Rent receipts: Must include the landlord's name, address, and PAN if rent exceeds Rs. 1 lakh annually.
3. Lease/rental agreement: Proof of rent payment and agreement details.
4. Proof of employment/income: Salary slips or income certificates.
5. PAN details of landlord (if applicable): Mandatory if annual rent exceeds Rs. 1 lakh.
6. Bank statements/proof of payment: Evidence of rent payments.

Additionally, the taxpayer must file a declaration (Form 10BA) confirming that they, their spouse, or minor child do not own residential property at their place of employment or residence.

Section 80GG of the Income Tax Act serves as a valuable tool for individuals facing the financial challenges of renting a home without the aid of HRA. By understanding the eligibility criteria and the nuanced calculation methodology, taxpayers can make informed decisions to optimise their tax liabilities. This provision not only acknowledges the diversity of income structures but also contributes to fostering a more inclusive and equitable taxation system.List of related income tax sections