80GG of Income Tax Act (2023 Guide)

In a country like India, where rent inflation remains a major problem, Section 80GG of income tax act incentives are of great help, especially in metropolitan areas. This special provision applies to those who do not receive Housing Allowance (HRA) and only pay rent. In principle, both the self-employed and the employee must meet certain requirements to be able to claim rent deductions according to section 80 GG.

All of these details, including deductible limits, eligibility requirements, calculations, etc., are in this article.

What can be claimed under 80GG?

Section 80GG provides a deduction for rent paid if an individual (employee or self-employed) has not received section 10(13A) HRA exemption or rent-free housing from the employer.

Even if you do not receive a housing allowance, you can claim a deduction for the rent you paid.

What is the maximum deduction for 80GG?

The deductions allowed under this section are lower of:

Actual rent paid less than 10% of adjusted total income

25% of such adjusted total income

The amount calculated at Rs. 5000 per month

Adjusted Total Income means Gross Total Income less long-term capital gains if included in Gross Total Income, and income under Sections 115A to 115D and deductions under Section 80C, except for deductions under this section.

Who is Eligible to Claim Tax Deductions?

To be eligible for deduction for house rent under Section 80GG of the Income Tax Act 1961, the following are conditions:

1. Only individuals and Hindu undivided families (HUFs) can claim these tax deductions. Companies and other enterprises cannot claim the same tax credit when paying rent in a given fiscal year.

2. Both employees and the self-employed can benefit from this regulation. Persons without significant income are exempt from claiming section 80GG, even if they pay rent.

3. Anyone wishing to claim this tax deduction must first submit a duly completed Form 10BA to the government. This form declares that the person filing it does not claim any benefit from the self-occupied property.

4. Section 80 GG income tax specifically targets people who do not receive housing rent allowance from their employer. If the individual’s salary includes her HRA payments, they are not eligible to claim an income tax refund on the rent.

5. If the annual rent exceeds INR 1,000,000, the taxpayer must submit a copy of the landlord’s PAN card to claim the tax incentive under Income Tax Section 80GG. This PAN card must belong to the owner of the rental property.

6. Individuals must not claim an HRA at any time during the tax year in which they claim tax benefits under Section 80GG. This is an important consideration for people who have changed jobs within the past 12 months. Even if a person did not receive HRA for the majority of the year, receiving it for only one month disqualifies him or her from claiming this yearly relief.

7. Those who live with their parents on the property owned by their parents also have the right to claim. One must sign a rental agreement with your parents. Also, the amount shown as rent is taxable when parents file their annual tax returns.

8. Non-resident Indians can also claim tax benefits under this provision. To apply, they must pay rent on a property in India.

How do you declare 80GG?

To submit a valid Section 80GG claim, an individual makes a declaration on Form 10BA.

Form 10BA is essentially a statement from a taxpayer claiming a deduction under Section 80GG. This form is readily available from any tax office, or your employer’s human resources department.

The details that the assessee must fill out are listed below.

• Name and PAN of the assessee
• Full address of the premises with zip code
• Duration of residency in months
• Payment method
• Payment amount
• Landlord name and address
• A declaration that you do not own a residential property in your name or in your spouse’s name, in your minor child’s name, or in the name of a HUF of which you are a member

How is HRA calculated under 80GG?

Let’s say your annual income is Rs 900,000, you are currently not receiving rent from your employer, and you are paying Rs 10,000 per month.

The applicable tax exemption amounts will then be

Rs.5,000 monthly (Rs.60,000 yearly), under the first point.

Rs.30,000 {(10,000*12) – (9,00,000*10%)}

Rs.2,25,000 (9,00,000*25%)

The lowest of these applies as a Section 80GG tax deduction, so only Rs.30,000 can be claimed. It is important to know that if the rent you are paying is more than INR 1 lakh per year, you will need to show your landlord’s PAN card.

Is proof required for 80GG?

Documents/evidence required to claim deductions under section 80GG

 1)    Rental Agreement and Rental Receipt.

 2)    If the rent exceeds Rs.100,000, provide the  PAN number of the landlord.

3)   Submission of Form 10BA. This ensures that you are not claiming benefits in property occupied by the owner at the same or another location.

Frequently Asked Questions (FAQs)

Can I claim both 80GG and HRA?

No, you cannot claim the Section 80GG deduction when claiming an HRA.

The benefit can only be used once, either through HRA or Section 80GG.

Can I pay rent to my parents and claim 80GG?

A taxpayer may pay rent to one parent and claim the amount as an HRA deduction under Section 10(13A) or Section 80GG.

Is section 80G and 80GG the same?

Section 80G and section 80GG are different. 

Under Section 80G of the Income Tax Act, you may claim tax deductions for charitable contributions made during the financial year.

Section 80GG is a declaration that must be made by a person wishing to claim a deduction for renting a rental property.

Wrapping Up

Under section 80GG of the Indian Income Tax Act, 1961, individuals (not legal entities) can claim a deduction from the rent paid for accommodation. To be eligible for any deduction under this section, the assessee must not be the owner of any residential property, not even in his or her own name or that of a spouse, minor child, or HUF to which he or she belongs.

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