Deduction under section 80GG of Income Tax Act

In general, the employee who is receiving ‘House Rent Allowance’ has a benefit of claiming an available exemption under section 10 (13A) of the Income Tax Act. However, there can be a situation, wherein, the individual (either self-employed or a salaried person) would not be receiving House Rent Allowance, but, is paying rent for his own residence.

In such a situation, such specific individual, who is not receiving House Rent Allowance, can claim the benefit of deduction available under section 80GG of the Income Tax Act, 1961. The provisions of the said deduction are taken up and explained in the existing article.

A person eligible for claiming deduction under section 80GG

Deduction under section 80GG is available only to an individual who has not received House Rent Allowance (i.e. HRA) at any time during the year.

List of conditions to be fulfilled for claiming deduction under section 80GG –

Following is the list of conditions which an individual need to fulfil in case he is willing to claim deduction under section 80GG of the Income Tax Act –

• In order to claim deduction under section 80GG, the individual should not be receiving ‘House Rent Allowance’ at any time during the year.
• Deduction is available in respect of any furnished or unfurnished accommodation, however, it is important that the same rented accommodation should have been occupied by the assessee for his own residence.
• Neither individual himself nor his spouse or minor child or HUF of which he is a member should not be owning any residential house at the place where the assessee performs office duties or ordinarily resides or causes his business / profession.
• The assessee should not own any residential accommodation in his own occupation, at any other place, the value of which is determined as per section 23 (2) (a) or section 23 (4) (a).
• The individual is required to file a declaration in Form No. 10BA.

It should be noted here that Form No. 10BA contains a declaration that the assessee has used the rented premises for self-use.

Further, additionally it also contains declaration that neither of them are owning any residential house at the place where the assessee performs office duties or ordinarily resides or causes his business / profession.

In Form No. 10BA, the assessee is also required to declare that he is not owning residential house, the value of which is determinable under section 23 (2) (a) or section 23 (4) (a).

Amount of deduction available under section 80GG –

Lower of the following amount would be available as a deduction under section 80GG of the Income Tax Act –

• INR 5,000 per month; or
• 25% of the adjusted total income; or
• Actual rent paid (-) 10% of total income.

One needs to apply the following formula, for arriving at adjusted total income –

Gross total income (sum of income under all heads)          XXXX

(-) Deductions u/s 80C to 80U (except section 80GG)      XXXX

(-) Short term capital gains under section 111A                    XXXX

(-) Long term capital gains                                                        XXXX

(-) Income covered within the sections 115A, 115AB, 115AC, 115AD and 115D   XXXX

Adjusted gross total income                                                      XXXX

Frequently Asked Questions (FAQ) –

1. What is 80gg section?

Section 80GG provides deduction, towards rent paid for own residence, to those individuals (self-employed or salaried person) who are not receiving House Rent Allowance.

2. Who can claim 80gg?

Deduction under section 80GG can be claimed by all those individuals who are not received House Rent Allowance.

3. How is 80gg deduction calculated?

Deduction under section 80GG would be lower of the following –

• • 25% of the adjusted total income; or
  • Actual rent paid (-) 10% of total income; or
  • INR 5,000 per month.

4. Can I claim HRA and 80gg?

No, claiming both HRA and deduction under section 80GG is not possible. The person receiving HRA is debarred from claiming the benefit of deduction under section 80GG.

Other Suggested Articles on Chapter VIA Deductions