Section 80GG - Tax Claim Deduction for Rent in Income Tax Act, HRA in Rent

Section 80GG of the Income Tax Act, 1961 is a provision that offers tax relief to individuals who are not in receipt of house rent allowance but are paying rent for their accommodation. This provision allows eligible individuals who are residing in a rented property to claim a tax deduction for the rent paid , provided they are either salaried or self-employed. It is important to note that the rent paid must be for the individual's own stay and not for someone else.

To claim an income tax deduction under Section 80GG, certain conditions must be met. These conditions are outlined below:

• The individual must not be receiving House Rent Allowance from their employer.
• The individual must have filed and declared Form No. 10BA.
• The assesse, their spouse, minor child, or Hindu Undivided Family (HUF) of which they are a member, must not own any residential property at the place where they typically reside, perform office duties, or conduct their business or profession.
• The assesse must not own any residential property that is occupied by them at any other location, the value of which is determined according to Section 23(2)(a) or Section 23(4)(a). In simpler terms, if an individual claims a deduction for a self-occupied property and pays rent for a place where they typically reside but do not own, they cannot claim a deduction under Section 80GG.

Under Section 80GG, the deduction amount is calculated as the minimum of the following:

• Excess of rent paid over 10% of Adjusted Total Income
• 25% of the individual's Adjusted Total Income
• Rs.5,000 per month (annually Rs.60,000)

As mentioned earlier, there are specific requirements that must be met to qualify for tax deductions under Section 80GG of the ITA. The following bullet points outline the requirements that individuals must fulfill to claim this deduction:

• Only individuals and Hindu Undivided Families (HUF) are eligible for this tax deduction. Businesses and other entities are not entitled to this benefit while paying rent within a fiscal year.
• This deduction is available to self-employed individuals and salaried professionals. If a person has no income, even though they pay rent, they are not eligible to claim Section 80GG benefits.
• To be eligible for this tax rebate, applicants must submit a properly filled out Form 10BA to the government. This form is a declaration that the person submitting it makes no claims about any benefits from a self-occupied property.
• This section is designed especially for people whose employers do not provide housing benefits. If an individual's salary includes an HRA payment, they are not eligible to file for income tax refunds for housing rent.
• If the annual rent exceeds Rs. 1 lakh, the taxpayer will need to submit a copy of the homeowner's PAN card to be eligible for tax benefits. The person renting out the space must be the owner of the PAN card.
• If an individual has claimed HRA during the fiscal year in question, they are not eligible for the tax benefit under Section 80GG. This is a crucial point for those who have changed jobs over the past 12 months, as even receiving HRA for just one month disqualifies them from receiving this annual reprieve.
• People who live with their parents in a home owned by their parents can also apply for Section 80GG assistance. To do so, they would need to execute a rental agreement with their parents. Additionally, the rent amount listed by parents in their yearly taxes will be subject to taxation.
• Non-resident Indians can also seek tax benefits under this clause. However, to be eligible, they must be renting a house in India.

Tax Deductions Under Section 24 of Income Tax for Home Owners Also Read:

If you're a taxpayer looking to claim a deduction for rent paid on a rental property under section 80GG, you'll need to file a declaration called Form 10BA. To be eligible for the deduction, it is necessary to file this form before filing the income tax return (ITR). In other words, you must file Form 10BA in order to claim the deduction under section 80GG for the rent paid.

To avail of the benefits under Section 80GG of the Income Tax Act, filing Form 10BA is mandatory. This form serves as a declaration by the taxpayer that they have rented a house during a specific period and have no other residential property. The following details need to be provided in the form:

• Assesse’s name and PAN
• Address (including postal code)
• Rental cost
• Mode of payment
• Tenure of residency (mentioned in months)
• Property owner’s name and address
• PAN of the rental house’s proprietor if the rental amount exceeds Rs.1 lakh in the financial year
• Declaration affirming that the taxpayer, his/her minor child, or spouse do not own any residential property.

To submit Form 10BA online and avail of the benefits under Section 80GG of the Income Tax Act, follow these steps:

1. Go to the Income Tax e-Filing Portal and login using your login credentials.
2. On the dashboard, navigate to e-file > Income Tax Forms > File Income Tax Forms.
3. From the drop-down menu, select Form No. 10BA and choose the relevant Assessment Year.
4. Select the Submission Mode as Prepare and Submit Online and then click to Continue.
5. Enter all the required details such as Name of Landlord, Details of Rent Paid, etc.
6. Preview the form and then submit it.

To utilize Section 80GG tax deductions, property owners must meet the following two requirements:

• The property owner must be currently residing on a property and making rent payments on it.
• The property or properties they own should not be close to where they work or live. If the property owner chooses to live in a rental flat despite owning property within the city, Section 80GG does not apply to their yearly income taxes.

Additionally, property owners can collect rent benefits in the city where they work, even if they own property in another city or region. In this scenario, the owned property is seen as being rented out.

The foundation for tax deductions under Section 80GG is provided by Tax Rule 2A. The lowest sum from the following calculations is considered as non-taxable income as per Section 10(13A):

1. Rs.5,000 per Month or Rs.60,000 Annually
2. Annual Rent minus 10% of Adjusted Gross Income:
3. 25% of Yearly Adjusted Total Income:

It is important to note that only the lowest of the three values determined for an individual qualifies for the Section 80GG deduction.

Section 80GG provides certain exceptions that should be considered before claiming a deduction for house rent. These exceptions include:

1. If the location of the house is situated where the individual is employed or runs a business, they would not qualify to claim a deduction on their house rent.
2. If an individual is already claiming the benefit of an owned home as self-occupied property in another location, they cannot claim a deduction on house rent.
3. If a person is living in a city and has a home in another place or town, the owned property will be considered as rented out.
4. If a person is residing with their parents in their home, they can easily claim the benefit of rent deduction as per Section 80GG.

Individual taxpayers can claim deductions under Section 80GG while filing their Income Tax Return (ITR) if they fulfill the conditions mentioned earlier. This deduction can be claimed in any of the ITR forms, including ITR 1 , ITR 2 , ITR 3, and ITR 4 , depending on their sources of income.

Example 1:

Siddharth earns an annual income of 5 lakhs and resides in a rented accommodation without receiving any house rent allowance. His annual rent payment is 1.5 lakhs.To determine his eligible deduction, the least amount among the following conditions will be considered: Condition 1: Monthly rental limit of 5,000 rupees, i.e., Rs 60,000 annually. Condition 2: Rent paid minus 10% of annual income, which is Rs 1 lakh Condition 3: 25% of the total annual income, which is Rs 1.25 lakhs. Since Condition 1 is the least amount, Mr. A will be eligible for benefit of Rs 60,000 annually

Example 2:

Raees has an annual income (after all deductions) of 3 lakhs and lives in a rented accommodation without receiving any house rent allowance.The annual rent he pays is Rs 72,000 (Rs 6,000 per month). To determine his eligible deduction, the least amount among the following conditions will be considered: Condition 1: Monthly rental limit of Rs 5,000, i.e., Rs 60,000 annually. Condition 2: Rent paid minus 10% of annual income, which is Rs 42,000. Condition 3: 25% of the total annual income, which is Rs 75,000. Since Condition 2 is the least amount, Mr. B will be eligible for benefit according to Condition 2.

Example 3:

Kanika, based in Lucknow, has a basic salary of Rs 20,000 and an HRA of Rs 7,000. She pays Rs 6,000 for her rented accommodation. To determine her eligible deduction, the least amount among the following three options will be considered:

1. 40% of her basic salary, which is Rs 8,000
2. Actual HRA, which is Rs 7,000
3. Actual rent paid minus 10% of basic salary, which is Rs 4,000 annually.

Thus, the annual deduction for Kanika is Rs 4,000, which is the least amount among the three options.