Section 80GG – Income Tax Deduction in respect of rent paid

Income-tax Department has provided taxpayers with several deductions availing which they can reduce the taxable income thereby reducing tax liabilities. But there are several deductions such as section 80C, section 80CCD, section 80D, section 80G, etc which taxpayers know and avail while filing the income tax return. There are many other deductions knowledge of which is not available to the majority of taxpayers. One such deduction is section 80GG where taxpayers will get a deduction of the amount of rent paid during the year. This deduction is available to both Salaried persons and also to a self-employed person. In this article, we will discuss conditions fulfilling which one can claim the deduction, quantum of deduction available, procedure to claim it, etc.

Condition to claim the Deduction

1) Individual/HUF – Only Individual or HUF are eligible to claim these deductions

2) No HRA to be received during the year – To claim deduction under section 80GG, taxpayer should not receive any part of House Rent Allowance in the salary. If employer provide home rent allowance (HRA) as part of the monthly compensation to the taxpayer, he/she can claim deduction under section _____. But he cannot claim additional deduction under section 80GG.

3)Does not own any property – Another Condition to claim deduction is that the assesse or his spouse or his minor child does not own any residential property at the place where he ordinarily resides or where he perform office duties or causes his business or profession. It is worth to be note that the family of taxpayer should not hold any residential property at the place where he ordinarily resides, but can own property at any other location.

4) All Owned Property to be declared as Deemed Let-out Property – The assesse should not own any residential accommodation in his or her own occupation, at any other place, whose value is to be determined as a Self-Occupied Property.

Amount Eligible for Deduction

Quantum of deduction shall be least of the following:-

A) 5000 per month

B)25% of Adjusted Total Income*

C)Actual rent less 10% of Adjusted Total Income*

*Adjusted Total Income = Gross Total Income except LTCG, STCG, 115A or 115D and all other deduction 80C to 80U to be excluded from income

Example – Mr. K, a businessman, whose total income (before allowing deduction u/s 80GG) for F.Y 2020-21 is INR 5,60,000/-. He paid a house rent of INR 12,000 per month in respect of residential accommodation occupied by him at Mumbai. What will be the deduction available?

It will be computed as follows:

• Actual rent Paid – 10% of total income – (12,000*12)- (10% *5,60,000): 88,000
• 25% of total income – 25% *5,60,000: 1,40,000
• 5,000 per month: 60,000

Deduction available will be INR 60,000/-

Procedure to claim Deduction

You will be required to file Form 10BA with details of payment of rent. Form 10BA is a declaration that has to be filed by an individual who wants to claim deduction under section 80GG for rent paid on rental property.

Frequently Asked Question

1) Can one claim deduction if he/she is living with his or her parents in their house?

Answer – If an individual is living with his father and mother in their house, then he/she can claim the benefit of rent deduction as per the section 80GG. He/she will need to make a rental agreement with parents in order to get the rent deduction. However, the mother and father whoever own the house will have to show the rent as income in their tax returns.

2) Can he claim deduction if the house is jointly owned by one’s son/daughter and their parents?

Answer – If the house is jointly owned by the taxpayer’s son/daughter and their parents then they cannot claim rent deduction benefit on their taxable income as all the criteria for claiming the deduction are not fulfilled.

3) Are Non-Resident Individual eligible to claim these deduction?

Section 80GG is applicable to both Resident and Non-resident. All Individuals and HUF including Non-Residents Individual are eligible to claim this deduction on satisfying above mentioned conditions

Hope this article will help you get complete knowledge of Section 80GG and hope this will help you use this deduction option to reduce your taxable income while filing Income-Tax Return and save Tax.

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