The word “home” has many different meanings, for example, it may refer to a location where we live with our loved ones. It doesn’t just mean a house with a terrace that shields us from the sun, rain, and wind. While some people prefer to rent their homes, others are home owners. The HRA deduction is known to exist for salaried employees in income tax. This implies that if the CTC covers HRA, the employee who is paying rent can claim an exemption from HRA. So, the question arise, “What if the HRA is not included in CTC?” can come up. Is there a part that permits professionals who work for themselves, salaried individuals, and individual business owners to claim a deduction? Yes, there is a section 80GG in income tax which allows to claim deduction for rent.

So let us understand that how one can claim deduction under section 80GG and the requirements which needs to be fulfilled in order to avail deduction under section 80GG.

1. What is section 80GG?

Ans : Under Chapter VI-A of the Income Tax Act, 1961, there is a specific provision called Section 80GG that offers tax relief to those who do not receive house rent allowance. In order to qualify for the tax deduction under this section, the taxpayer needs to be living in a rental property. In addition, the monthly salary from his or her work should not include a house rent allowance (HRA).

 2. Who can avail deduction under section 80GG?

Ans : Under Section 80GG :

1. Deduction under section 80GG can only be availed by individuals and Hindu undivided family. This clause is also applicable to individuals who work as self-employed contractors or as salaried professionals.

2. In order to receive this tax rebate, applicants must first send the government a properly completed Form 10BA. This form is an admission that the person submitting it makes no claims as to any advantages from a self-occupied property wherever.

3. To be eligible for tax benefits under, the taxpayer must provide a copy of the homeowner’s PAN card if the annual rent exceeds Rs.1 lakh. Remember that in rental properties, the PAN card must belong to the landlord.

3. How deduction under section 80GG is calculated?

Ans : The least amount from the following computations is regarded as non-taxable income in accordance with Section 10(13A).

1. Annual Rent paid minus 10% of adjusted total income

2. 60000 a year or 5000 per month

3. 25% of adjusted total income.

No deduction if any residential accommodation is owned by the assess/his spouse/minor child/HUF at the place where he ordinarily resides or performs the duties of his office or employment or carries on his business or profession.

4. What is adjusted total income?

Ans : The entire gross income less any particular deduction is known as the adjusted gross income. The total taxable amount is the amount that results from the AGI calculation. Your annual gross income (AGI) is a useful statistic that the income tax department uses to calculate your taxable income. The AGI value may have an impact on the amount of tax deductions and the requirements needed to qualify for a particular type of charitable contribution. Also capital gains both long and short term are not included in adjusted total income as they are taxed at special rates.

All about deduction under Section 80GG of Income Tax Act, 1961

5. Can Assessee pay rent to parents and claim deduction under section 80GG?

Ans : If an Assessee pays his parents rent, he may be eligible for a deduction under section 80 GG as long as the rental income is included in the parents’ total income when the returns are filed.

6. Can Assessee claim HRA and also deduction under section 80GG?

Ans : No, if an Assessee is claiming HRA, he is not eligible to make a deduction under section 80GG. The benefit may only be claimed once under Section 80GG or through HRA.

Conclusion: Understanding Section 80GG is crucial for individuals who do not receive HRA and pay rent for accommodation. This provision offers significant tax benefits and can help reduce the tax burden for eligible taxpayers.

*****

The above article is written by Mr. Mihir Verma (mihir.verma@abacussolutions.co.in) and reviewed by Mr. Suyash Tripathi (suyash.tripathi@abacussolutions.co.in).

Author Bio

Qualification: CA in Practice
Company: Suyash Tripathi & Co. Chartered Accountants
Location: MUMBAI, Maharashtra, India
Member Since: 18 May 2020 | Total Posts: 76
Mr. Suyash Tripathi is a member of the Institute of Chartered Accountants of India (ICAI). He has an experience in the fields of Income Tax, International Taxation, Company Law, Banking, Finance etc. He has been conducting Statutory & Tax audit, Internal audit of large & medium scale Limited View Full Profile

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