Section 80GG of the Income Tax Act

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In India, middle-class families make up the majority of the population. Additionally, paying taxes may have a slight negative impact on their finances. Furthermore, although being a financial strain, paying taxes on time is generally understood to be more of a duty and an obligation towards the country.

However, the government has established a number of rules for taxpayers that give them the chance to deduct certain expenses from their taxes. One such programme is Section 80GG Deduction of the Income Tax Act of 1961, which enables tax benefits to be claimed by taxpayers who rent their housing without receiving any compensation from their jobs.

What is Section 80GG?

Section 80GG of the Income Tax Act provides much-needed assistance for salaried individuals who pay rent but do not receive any Home Rent Allowance or HRA from their respective companies. Section 80GG helps them claim rent benefits by listing their expense as a part of recurring payments while filling out the income tax returns. This can be beneficial for the individual as they can save valuable money that can otherwise be used to meet various financial ends. They must fill out the required forms and provide proof of their rental expense. Moreover, there are a few parameters that the individual needs to satisfy to receive the benefits fully.

Deduction under Section 80GG

Under Section 80GG, individuals can claim at least the following standard deductions.

  • A rental deduction of at least INR 5000 per month or INR 60,000 a year can be availed.
  • Keeping aside 10% of the total revenue, taxpayers can claim the rest of the amount paid for rent.
  • An amount equivalent to 25% of the total annual revenue.

Who Can Claim Tax Deductions Under Section 80GG?

Anyone with a rental agreement who has not received any HRA benefits from their employer can claim the Section 80GG deductions. Furthermore, the individual must not be an owner of any properties. This also applies to their spouse or children. They must not own any properties in the location of their workplace. All these parameters will be required to be fulfilled by the applicant. Moreover, the applicant also needs to be aware that deductions up to INR 60,000 are.

How to Complete Form 10BA Correctly?

Filling out Form 10 BA is mostly used to state that you, your spouse, or your children did not own any property during the preceding fiscal year and that you lived in a rented residence during that time.

  • Filing a Form 10 BA is the first and most important task applicants must finish. This entails the person claiming that they pay a specific amount in rent each month and rely on another person’s property for residential needs.
  • The official website of the income tax e-filing portal is where Form 10 BA can be filled out electronically.
  • The information will include the rent payment and the name of the property owner.
  • The applicant must provide a PAN card evidence from the landlord for every rental agreement that costs more than INR 1 lakh.

How Do Property Owners Utilize Section 80GG Tax Deductions?

If a property owner meets two primary requirements, they are eligible to claim deductions under Section 80GG. Here are some examples:

  • The owner of the property must be paying rent on a place where they already live.
  • The owner’s property shouldn’t be located in the same city or county as their place of employment. Even if they own property in the city, if they opt to reside in a rental apartment, Section 80GG does not apply to their yearly income taxes.
  • The candidate must also not be getting a Home Rent Allowance from their job, which is another requirement.

How Are Deductions Calculated Under Section 80GG?

Individuals may deduct at least the following standard deductions under Section 80GG.

  • The minimum rental deduction is INR 5000 per month, or INR 60,000 per year.
  • Taxpayers may deduct the remainder of the rent paid after setting aside 10% of the total revenue.
  • A sum equal to 25% of the overall yearly income.

Let’s follow the below example for a more clear understanding of how deductions are calculated under Section 80 GG:

Let’s say Mr. Aman has an annual income of Rs. 5,00,000 and pays a rent of Rs. 10,000 per month. In this case, he can claim a deduction of Rs. 60,000 (i.e., Rs. 10,000 x 12) under Section 80GG. However, the amount of the deduction will be limited to the least of the three amounts mentioned above, which in this case is Rs. 5,000 per month or Rs. 60,000 per year.

From Where can This Form be Accessed?

You must complete Form 10BA if you want to be eligible for benefits under Section 80GG. The following describes how to do this properly:

  • Name and PAN information
  • Whole address
  • Payment system
  • Given the number of months the residence will last.
  • Rental charge
  • Address of the property owner
  • Assurance that no one in your family, including you, owns any other residential property.
  • Owner PAN of rented property.

The human resources division of the company where you are an employee will have access to this form. The form is also available online for download or at your local tax office.

How Can Property Owners Claim Tax Deductions under Section 80GG?

If a property owner meets two primary requirements, they are eligible to claim deductions under Section 80GG. Here are several examples:

  • The owner of the property must be paying rent on a place where they already live.
  • The owner’s property shouldn’t be located in the same city or county as their place of employment. Even if they own property in the city, if they opt to reside in a rental apartment, Section 80GG does not apply to their yearly income taxes.

80GG Deduction in Respect of Rent Paid

Section 80GG is a subsection mentioned in chapter IV-A of the Income Tax Act of 1961. The policy’s primary purpose is to provide an opportunity for individuals to avail of tax benefits for the rental expenses they incur every month without any rental allowances. There are certain conditions that these individuals need to adhere to become beneficiaries of the same.

Eligible Amount of Deduction Under 80GG – 80GG Deduction Limit

Anyone making a rental payment and not getting any Home Rent Allowance or HRA benefit from their employer can request a tax deduction under Section 80GG of the Income Tax Act 1961. This act allows taxpayers to get a reduction in the total payable taxable amount. However, before one gets their hopes too high, there are certain 80GG deduction limits that they need to understand. Per the 80GG deduction policy, the maximum amount one can benefit is up to INR 60,000, which is INR 5000 every month.

What will be the Quantum of Deduction Under Section 80GG?

It is an added advantage for taxpayers to understand the dynamics of deduction under 80GG to calculate the amount they are eligible to claim. There are mainly three scenarios that are compared by the authorities to assess the amount of deduction. Firstly, a standard amount of INR 60,000 is offered. Secondly, an amount is taken with 10% of the total income deducted; lastly, 25% of the total income is considered. Authorities compare these three scenarios and take whatever amount makes up the lowest. In the final scenario, the income taken is adjusted. The adjusted income includes any long-term gains, short-term investment gains mentioned in section 111A of the income tax act, and other incomes mentioned in sections 115A, 115AB, 115AC, or 115AD.

Examples in section 80GG

Few examples to represent how the Section 80GG deduction functions are as follows:

Let’s say that person X has an annual income of INR 5,00,000 but has to rent an apartment as they have moved to a new city for their job. However, they have not been given any provision of home rent allowance from their employer. As part of the rent, an annual expense of INR 1,50,000 is paid off to the homeowner. There will now be either of the following scenarios that can happen.

  • Firstly, they can claim a deduction of up to INR 60,000 from their total income tax payments.
  • Secondly, setting aside 10% of the annual income, that is INR 5,000 for the individual, they can claim deductions of about INR 1,00,000.
  • Thirdly, 25% of their overall revenue can be available for deduction, which is about INR 1,25,000.

 

The condition is that whatever makes up the least amount would be considered by the Income Tax Department. Here, the first scenario will be taken into account. Thus, person X would be eligible for a deduction of INR 60,000 under the section 80GG deduction.

For another example, let’s assume that Person Y has an annual revenue of INR 3,00,000 which is adjusted after all deductions. This person also has to stay in rented accommodation for which their employer has no allowances. The annual rent of person Y pays about INR 72,000. Again, out of the three scenarios, the least possible outcome will be picked by the Income Tax Department.

  • Firstly, the opportunity to claim INR 60,000 for the whole financial year.
  • The second scenario will be to put aside 10% of the income and claim whatever remains. Here it will be INR 42,000.
  • Thirdly, taking out 25% of the income. Here it will be INR 75,000.

Related Resource 
Deductions Under Section 80C
Income Tax Slabs and Rates
Income Tax Refund Status
Income Tax e-filing
ITR – Income Tax Return

FAQs

What is Section 80GG of the Income Tax Act, 1961?

Section 80GG of the Income Tax Act is the provision for taxpayers to claim a return for rental expenses paid without getting any rent allowances from the employer. There are specific parameters and conditions that the applicant will need to adhere to.

Is Section 80GG eligible if we are filing taxes under 44ADA?

One can apply for a claim under section 80GG whether or not they have filled their taxes under the 44ADA. 44ADA involves the calculation of business profits and earnings and does not affect the 80GG deductions.

How do I claim my rent on 80GG?

To claim deduction under section 80GG, one must fill out Form 10BA from the e-filing online portal. They have to disclose the amount of rent paid and the details of the owner of the accommodation.

Can I claim rent paid as a tax deduction?

You can claim your rent paid as a tax deduction. If you are getting a Home Rent Allowance, you can use the same while filing e-tax returns. If there is no HRA, you can use section 80GG of the income tax act to claim a deduction. This will necessarily require you to fill the Form 10BA

Can I pay rent to my parents and claim 80GG?

You can pay your parents’ rent and claim benefits of Section 80GG in case you are not receiving any rent allowance from your employer. You will be required to show your parents’ PAN details to prove that the rent is being paid monthly.

Can I pay rent to my wife and claim HRA?

You must enter into a legal agreement with your wife about rent payment. You will also be required to show proof of rental payment by showing the PAN details of your wife.

Who is eligible for an 80GG deduction?

Anyone paying rent while not getting any HRA benefits from their respective employer is eligible to claim an 80GG deduction. Also, they should not be an owner of any property.