Income Tax

Section 80GG of Income Tax Act

Section 80GG of Income Tax Act

Last Updated : March 14, 2023, 1:24 p.m.

If you are getting HRA or house Rent allowance but paying rent, you can apply for a tax deduction on the rent paid by you under Section 80GG of the Income Tax Act, 1961. The maximum deduction allowed under this Section 80GG is Rs. 60,000 per year which means Rs. 5000 per month.

You cannot enjoy the benefits of this Section 80GG if the house property is under the name of your minor child or your wife. To claim the benefits available under this section have to fill the form 10 BA. So, let us discuss a few essential things about Section 80GG and how you can enjoy the benefits offered by this section of the Income Tax Act.

What is Section 80GG in Income Tax?

Section 80GG of the Income Tax Act is a specific provision under Chapter VI-A of 1961’s Income Tax Act.1961. This chapter offers tax reprieve to those individuals who cannot afford the house rent allowance. In order to become eligible for desired tax deduction under this specific section, known as Section 80GG, an individual must reside in a rented house or property. Moreover, their employers must not offer an HRA or house rent allowance as a part of the monthly compensation.

Section 80GG deduction can be applied to eligible self-employed and salaried professionals. Therefore, if a person operates a specific business, they are just as capable of claiming this tax deduction as salaried individuals.

What is the 80GG deduction?

Usually, HRA works as a part of your income, and you can claim a deduction for HRA. If you do not get any HRA from your company or employer and can make payments towards rent for any unfurnished or furnished accommodation used by you for your own residence, you can be eligible for claiming deduction under Section 80GG towards the rent that you need to pay.

Who is eligible to ask for tax deductions under Section 80GG?

As mentioned earlier, an individual has to meet some specific prerequisites to enjoy tax deductions under this specific section of the Income Tax Act. Below some important factors are listed that a person has to fulfil in order to claim tax deduction under Section 80GG of the Income Tax Act.

  1. People who are either self-employed persons or salaried professionals can enjoy the benefits of this provision. If a person has no income to speak, they are not qualified to seek advantages under Section 80GG of the Income Tax Act, even if they need to pay rent.
  2. Only HUF or Hindu Undivided Family and individuals are eligible to claim these kinds of tax deductions. Enterprises or other businesses cannot enjoy the same tax discounts upon giving rent in a given financial year.
  3. Those individuals who are trying to avail of this tax exemption or rebate have to submit a Form 10BA duly filled out to the government beforehand. This specific form states that the person filing it does not claim to benefit from a property that is self-occupied in any location.
  4. If the annual rent becomes more than Rs. 1 lakh, the taxpayer must submit a copy of the homeowner’s PAN card if they wish to claim proper tax benefits under Section 80GG of the Income Tax Act. It is important to remember that this PAN card needs to belong to the property owner when a person resides on rent.
  5. Section 80GG of the Income Tax Act is mainly designed for those individuals who do not get a home rent allowance from their employers. If the salary of a person includes HRA payment, he/she will be ineligible to request income tax rebates related to housing rent.
  6. A person should not have claimed HRA at any time within the fiscal year for which that person is claiming the tax benefit under this Section 80GG. This is a vital point for those people who have changed their employers in the last year. Even if a person did not receive a house rent allowance for a significant part of the year, getting the same for only a month will disqualify him/her from getting this yearly reprieve.

People living with their parents in a property under their parents can also claim benefits under Section 80GG of the Income Tax Act. To avail of this, an individual must sign a formal rental agreement with his/her parents. In addition, the amount shown as rent will be taxable when his/her parents file their yearly taxes.

Also, non-resident Indians are eligible to claim tax exemptions under Section 80 GG of the Income Tax Act. However, they need to pay rent for a property in India to be eligible to enjoy this benefit.

How are the deductions calculated under Section 80GG?

Tax deductions under Section 80G depend on Tax Rule 2A. According to Section 10(13A), the least amount from the below-mentioned calculations is regarded as non-taxable income.

  • The rent amount per year minus 10% of the adjusted total income of the taxpayer.
  • Rs. 5000 per month or Rs. 60,000 per year.
  • 25% of the adjusted total income per year.

It is vital to note that after calculating the three figures for a person, only the least from them will be considered applicable for Section 80GG deduction. So, you can say that a person is liable to receive a higher tax deduction under Section 80GG of the Income Tax Act, mainly because his/her calculated total income is higher than the other person.

How to fill the Form 10BA?

Form 10BA is very important for a person who is looking to get Section 80GG tax benefits. So, one must fill in the details of the form carefully. They need to fill in things like:

  1. Name and PAN number of the assessee.
  2. Full address of the assessee with postal code.
  3. Rental amount.
  4. Mode of payment.
  5. Tenure of residency in months.
  6. Name and address of the property owner.
  7. PAN number of the owner of the rented property if the total rent exceeds Rs. 1 lakh in a financial year.
  8. Declaration stating that the assessee and his/her spouse or minor kid who is not the owner of any other residential property.

From where can this form be accessible?

These specific forms are available from different sources, including the human resource department of any well-known organisation. One can even get this from tax offices. However, the easiest way to get one is online. People can search for this form and download it from several official websites.

Conclusion

Therefore, if you are an earning member of your family and are living in a property that needs you to pay monthly rent, you can claim tax benefits under Section 80GG of the Income Tax Act and live a happy life.

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