What is Section 80GG? Eligibility, Benefits and How to Claim

In taxation, it’s essential to understand the provisions available that can help reduce your tax liability. For individuals who do not receive a House Rent Allowance (HRA) from their employers, Section 80GG of the Indian Income Tax Act is a relief. 

This provision allows taxpayers to claim a deduction for their rent, providing a much-needed cushion against the burden of rental expenses. In this guide, we’ll explore Section 80GG, its eligibility criteria, and how to claim deductions, using simple terms to make it accessible for everyone.

What is Section 80GG of the Income Tax Act?

Section 80GG is a provision in the Indian Income Tax Act, specifically designed to provide tax relief to individuals who are paying rent for their accommodation but do not receive a House Rent Allowance (HRA) as part of their salary. 

In simple terms, if your employer does not provide you with an HRA component in your salary, you can claim a deduction on the rent you pay, subject to certain conditions.

The 80GG deduction limit allows you to deduct a maximum of ₹5,000 per month or 25% of your total income (whichever is lower), helping to reduce your taxable income. While this deduction is available to both salaried individuals and self-employed professionals, it’s important to note that certain conditions must be met to be eligible.

Also Read More About Section 80

Who Can Claim Deductions Under Section 80GG?

To claim deductions under Section 80GG, individuals need to fulfil several criteria:

1. Self-employed or Salaried Individuals: Whether you’re self-employed or on a company payroll, you can claim this deduction if you do not receive an HRA from your employer.
2. No Owned Residential Property in the Same City: You must not own a residential property in the city where you work or conduct your business. The deduction is only available to those renting their accommodation in their city of employment.
3. Rent Must Be Paid for Accommodation: The deduction applies only if you are paying rent for your accommodation. It could be for a house, apartment, or any residential property, furnished or unfurnished.
4. No Property Owned by Spouse or Minor Child: You cannot claim the 80GG deduction if your spouse or minor child owns a residential property in the same city where you work or conduct your business.
5. Living with Parents Doesn’t Qualify: If you reside in a property owned by your parents and pay rent to them, you are not eligible for this deduction under Section 80GG.
6. No House Rent Allowance: If your salary includes any HRA from your employer, you cannot claim a deduction under Section 80GG. However, if your HRA is insufficient to cover the entire rent, you may claim a deduction for the remaining amount.
7. Submission of Form 10BA: To avail of the 80GG deduction, you need to submit Form 10BA, which is a declaration stating that you are paying rent and that you do not own any residential property in the same city where you are employed.
8. Filing of Income Tax Return: You can only claim this deduction if you have filed your income tax return within the stipulated deadline.

How is the 80GG Deduction Calculated?

The calculation of the 80GG deduction follows a simple formula. The deduction amount is the lowest of the following:

• ₹5,000 per month (or ₹60,000 annually).
• 25% of your total annual income.
• The excess of rent paid over 10% of your adjusted gross income.

Let’s illustrate this with an example:

Example Calculation:

From this example, you can see that Individual A can claim ₹60,000 as a deduction under Section 80GG, while Individual B can claim ₹56,000. The key takeaway here is that the deduction is the lower of the three values calculated.

Filing Form 10BA for Section 80GG

To claim the 80GG deduction, you must file Form 10BA with your income tax return. This form serves as a declaration stating that you do not receive HRA and are not the owner of any residential property in the same city where you work.

Here’s how you can file Form 10BA:

1. Access the Form: You can access Form 10BA from the Income Tax Department’s official website or by visiting your nearest tax office.
2. Fill in the Details: Complete the form by filling in your name, PAN, the amount of rent paid, your landlord’s details, and the property’s address.
3. Confirm No HRA: The form requires you to confirm that you do not receive any HRA from your employer.
4. Submit the Form: Once filled, submit Form 10BA along with your income tax return for the financial year in which you are claiming the deduction.

How Can Property Owners Claim Deductions?

Section 80GG of the Income Tax Act only applies to those who do not own property in the same city where they work. If you do own property, you can claim deductions under other sections of the Income Tax Act, such as Section 24 (for interest on home loans) or Section 80C (for principal repayment of home loans).

If you own a property but live in a different city for work and rent an apartment there, you can claim the 80GG deduction for the rent paid. However, in this case, the property you own in another city is treated as “let out,” you will need to declare any rental income you earn from that property.

Documents Required for Claiming Section 80GG

To claim a deduction under Section 80GG, you must provide certain documents. Ensuring these are in order will help smooth the process and avoid any issues with the Income Tax Department. The required documents include:

1. Form 10BA: A duly filled Form 10BA declaration confirming you do not receive HRA and do not own property in the city of employment.
2. Rent Receipts: Valid rent receipts with details such as the amount paid, the period for which rent was paid, and the landlord’s name and address.
3. Landlord’s PAN: If your annual rent exceeds ₹1 lakh, you must submit your landlord’s PAN details.
4. Proof of Income: Salary slips, bank statements, or income tax returns to substantiate your income and to calculate the 80GG deduction.
5. Lease or Rental Agreement: It is advisable to keep a copy of the lease or rental agreement as proof of your tenancy.

Conclusion

Section 80GG of the Income Tax Act is an essential provision for individuals who do not receive HRA and are living in rented accommodation. By allowing deductions for rent paid, Section 80GG helps reduce tax liability and offers financial relief.

Claiming the 80GG deduction is straightforward if you meet the eligibility criteria and have the necessary documents in place. Remember to file Form 10BA, maintain rent receipts, and ensure you adhere to the income limits to make the most of this tax-saving provision.

Whether you’re self-employed or a salaried individual, being aware of the 80GG deduction limit and how it works can help you save on taxes and better manage your finances. Keep in mind that the deduction you claim under Sec 80GG is subject to specific rules, so always ensure you comply with the guidelines set by the Income Tax Act.

FAQs