Deduction In Respect of Rent Paid Sec 80GG

Deduction In Respect of Rent Paid Sec 80GG | Eligibility, Calculation

Deduction In Respect of Rent Paid Sec 80GG: of Income Tax Act, 1961 is a special provision that provides tax relief to individuals who do not make use of house rent allowance. However, in order to claim the deductions for rent paid under Section 80GG one will have to stay in the rented home. In addition to this, the individual’s employee shouldn’t include the HRA allowance in his/her monthly salary. On this page, let’s learn everything about deductions for rent paid under Section 80GG in detail. Read on to find out more.

Section 80GG Eligibility

Professionals who are salaried or self-employed are eligible for the Section 80GG deduction. In addition to this, the officials of the Income Tax Department have listed a few more prerequisites which are listed below:

  • These tax benefits are only available to individuals and Hindu Undivided Families (HUF). Businesses and other businesses are not eligible for the same tax concessions when paying rent in a particular fiscal year.
  • This benefit is available to salaried professionals as well as self-employed individuals.
  • If one has no income, then he/she cannot enjoy the tax deductions under Section 80GG.
  • The Income Tax Act’s Section 80GG is meant for people who do not receive a house rent allowance from their employers. If a person’s salary includes an HRA payment, he or she is eligible to collect housing rent income tax rebates.
  • To claim tax benefits under Section 80GG of the Income Tax Act, the taxpayer must produce a copy of the homeowner’s PAN card if the annual rent exceeds Rs.1 lakh. Keep in mind that this PAN card must belong to the owner of the property that you are renting.
  • The HRA shouldn’t be claimed at any point during the financial year for which the tax advantage under Section 80GG has been claimed. This is more important for those who have changed jobs in recent years. Even if one does not receive HRA for the majority of the year, receiving it for a month disqualifies one from claiming this yearly respite.
  • Those who want to take advantage of this tax deduction must first submit a completed Form 10BA to the government. This form certifies that the person filling it out does not receive any advantage from a self-occupied property in any area.

How Do You Calculate 80GG?

Section 80GG Calculation: This section’s tax deductions are based on Tax Rule 2A. The least amount from the following calculations is considered non-taxable income under Section 10(13A).

  • 5000 rupees per month or Rs.60000 per year
  • The amount of yearly rent minus 10% of the taxpayer’s adjusted total income.
  • A year’s worth of adjusted total income is equal to 25% of the total income.

Please note that after computing the three values for an individual, only the lowest of the three is used to determine the Section 80GG deduction.

Two distinct examples of tax deductions based on varied income and rent payments are explained in the table below.

Factors Example A Example B
Adjusted Total Income (ATI) Rs.200000 Rs.180000
Total Yearly Rent Payable Rs.80000 Rs.60000
Deductions under Section 80GG of the Income Tax Act:
Yearly Rent – 10% of ATI
Rs.60000 Rs.42000
25% of ATI Rs.50000 Rs.45000
Rs.5000 per month Rs.60000 Rs.60000
Deductions Applicable Rs.50000 Rs.42000

From the table, In the case of Example A is eligible for a bigger tax deduction under Section 80GG, owing to the fact that his or her adjusted total income is higher than example B’s.

Furthermore, because the quantity in this calculation is lower than the other two clauses, the provision that considers 25% of the ATI as a tax discount applies in the first situation.

In the case of Example B, however, yearly rent less 10% of ATI yields a lesser quantum than the other calculations. As a result, for example, B, is the relevant tax deduction.

Section 80GG Maximum Limit

Section 80TTA only allows for a maximum deduction of Rs 10,000. If your interest income from the foregoing sources is less than Rs 10,000, you can deduct the entire interest income. However, if your interest income exceeds Rs 10,000, your deduction will be limited to that amount.

Form 10BA for Claiming Deductions for Rent Paid

If you want to take advantage of Section 80GG tax benefits, you’ll need to fill out Form 10BA. These forms are widely available from a variety of sources. Also one can reach out to their HR department to access the form. Also one can download Form 10BA from the income tax department official website. The From 10BA will look like the following image:

From 10BA
The list of details one must fill out in Form 10BA for claiming the deduction in respect of rent paid are listed below:

  • Complete address, including postal code
  • The assessee’s name and PAN
  • Payment method
  • Tenure of residency in months
  • Amount of rent
  • Name and address of the property owner
  • The assessee, his/her spouse, and any minor children do not own any other residential property, according to the declaration.
  • If the rent exceeds Rs.1 lakh in a particular financial year, the rented property’s owner’s PAN number is required.

Can Property Owners Claim Deductions under Section 80GG?

Property owners can claim the deductions for rent paid only if they meet the following criteria:

  1. They must be paying rent on a home they currently reside.
  2. They should not have a home or properties in the same city or location as their workplace. Section 80GG does not apply to their yearly income taxes if they own a home in the city but choose to reside in a rented flat.

FAQs on Deductions For Rent Paid Under Section 80GG

Question 1.
Individuals residing with parents can claim the deductions under section 80GG?

Section 80GG benefits are also available to people who live with their parents in a home owned by their parents. This would require signing a rental agreement with one’s parents. Furthermore, when the parents submit their annual taxes, the sum indicated as rent will be taxed.

Question 2.
Can NRIs claim deduction u/s 80GG?

Yes, NRIs can claim the deductions under Section 80GG of the Income Tax Act. But for that, one will have to rent a property in India.

Question 3.
Can pensioners claim 80GG deduction?

Yes, Pensioners can claim the 80GG deduction, since they don’t receive the HRA.

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