Section 80GG : Deduction on Rent Paid

Section 80GG : Deduction on Rent Paid

Section 80GG : Deduction on Rent Paid

Claim Deduction on Rent Paid under Sec 80GG

Introduction

Under Section 80GG, an individual can claim deduction on rent paid if he/she does not receive House Rent Allowance (HRA) even if he/she pays rent for accomodation. The individual can be either self-employed or salaried employee who is not eligible to avail the benefit of HRA exemption. Section 80GG is designed for such type of taxpayers.

Section 80GG : Deduction on Rent Paid

This section 80GG provides the deduction of house rent on fulfillment of certain conditions which we are going to dicuss in this article.

Eligibilty

For Whom?
  • Individuals who do not get HRA in their salary which includes even self-employed and professionals who do not get salaries as such. It can be claimed by an individual or a HUF.
  • It is not for those individuals who get HRA in their salaries. HRA is an important component of salary. It is given by employers to their employees to accommodate expenses on rent paid. HRA in salaries is claimed under another section of income tax 10(13A). It can be partially or fully claimed based on your actual expense on rent which is claimed by submitting rent receipts. If you get HRA in your salary and are not living in a rented space, the HRA component of your salary is fully taxable.
Conditions
  • To claim rent paid under section 80GG, you, your spouse, minor child or HUF you are a part of should not own a residential house in any place you are employed, operate your business or profession or in any other city where you are claiming benefit of a self-occupied house.
  • It means benefit of claiming tax deduction for claiming repayment of interest and principle of home loan and claiming 80GG together is not possible.
  • If you own a house in some another city, it is treated as rented out.
  • While claiming tax deduction under this section, you need to fill and submit form 10 BA which is declaration stating you satisfy the first 2 conditions.

What is the Amount that can be claimed?

Deduction under Section 80GG shall be the least of the following-

  1. Rs. 5,000 per month i.e. Rs. 60,000 per year
  2. Rent Paid Less 10% of Adjusted Total Income
  3. 25% of Adjusted Total Income
What is Agjusted Total Income?
  • Adjusted Total Income is calculated by deduction following incomes/deduction from Gross Total Income :
    1. Short Term Capital Gain from Equity Shares and MF
    2. Long Term Capital Gain (Equity as well as debt)
    3. Exempt Income Like Dividend on shares, Interest on PPF etc.
    4. Deductions from section 80C to 80U

Example

 Section 80GG : Deduction on Rent Paid
Section 80GG : Deduction on Rent Paid

If your adjusted total income is Rs.4 Lakhs and annual rent paid is Rs.2.4 Lakhs, then the least of the following will be allowed for deduction:

  1. Rs. 5,000 per month i.e. Rs. 60,000 per year
  2. Rent Paid Less 10% of Adjusted Total Income = (2.4 Lakhs – 10%(4 Lakhs)) = Rs.2 Lakhs
  3. 25% of Adjusted Total Income = 25%(4 Lakhs) = Rs.1 Lakhs

Important Points

  1. While claiming deduction under Section 80GG, employee shall furnish rent receipts or rent agreement. 
  2. Also he needs to fill Form 10BA which will prove that he is not claiming benefit of his self-occupied property.
  3. If Rent paid to the landlord exceeds Rs. 1,00,000, then he needs to furnish PAN to his landlord (Landlord needs to provide tenant details in his income tax return.)
  4. Following are the details required to be submitted for claiming deduction under section 80GG :
    • Name of the assessee
    • PAN
    • Full address of the premises along with Postal Code
    • Tenure (in months)
    • Payment Mode
    • Amount Paid
    • Name of landlord
    • address of the landlord.
    • PAN of the landlord is mandatory if rental is more than INR 1 lakh for the assessment year.
    • A Declaration confirming that no other house property is owned by the taxpayer himself or in the name of Spouse / minor child or by the HUF of which he is a member.

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