Section 80gg

What is Section 80GG?

Section 80GG is a provision in the Income Tax Act, 1961, designed to provide tax relief to individuals who pay rent but do not receive HRA as part of their salary. This section enables eligible taxpayers to claim a deduction for the rent paid on residential accommodation, thereby reducing their taxable income.

The maximum deduction allowed under Section 80GG is ₹60,000 per annum (₹5,000 per month), but the actual deduction depends on various conditions.

Unlike the HRA exemption available under Section 10(13A), which applies only to salaried individuals receiving HRA, Section 80GG is available to both salaried and self-employed individuals who meet specific eligibility criteria.
 

Eligibility Criteria for Section 80GG

To claim a tax deduction under Section 80GG, an individual must meet the following eligibility conditions:

No House Rent Allowance (HRA)

• The individual must not receive HRA from their employer. If HRA is a part of the salary structure, Section 80GG cannot be claimed.

Must Be an Individual or Hindu Undivided Family (HUF)

• Only individual taxpayers and Hindu Undivided Families (HUFs) can claim deductions under this section.
• Businesses, companies, or other entities cannot claim tax benefits under Section 80GG.

Self-Employed or Salaried Individual

• This section applies to both salaried individuals and self-employed professionals who do not receive HRA but pay rent for their accommodation.

Rent Paid for Residential Accommodation

• The deduction is available only if the individual is paying rent for residential accommodation and not for commercial property.

No Ownership of Residential Property in the Same City

• The individual, their spouse, or minor child should not own residential property in the city where they are claiming this deduction.
• If the individual owns a house in a different city but is renting accommodation in their work city, they can still claim a deduction under Section 80GG.

Submission of Form 10BA

• To claim the deduction, the taxpayer must file Form 10BA, which is a declaration stating that the individual does not own a self-occupied property and is paying rent for accommodation.

How is the Deduction Under Section 80GG Calculated?

The deduction under Section 80GG is calculated as the least of the following three amounts:

₹5,000 per month (₹60,000 annually)

25% of Adjusted Total Income (ATI)

• (Adjusted Total Income = Gross Income – deductions under Section 80C to 80U except 80GG)

Actual rent paid minus 10% of Adjusted Total Income

Example Calculation of Section 80GG Deduction

Let’s consider two individuals to understand how the deduction is calculated.

In this case:

• Individual A can claim ₹60,000 as a deduction.
• Individual B can claim ₹56,000 as a deduction.

The deduction is always the lowest of the three conditions mentioned above.
 

How to Claim Deductions Under Section 80GG?

To claim tax deductions under Section 80GG, follow these steps:

Step 1: Ensure You Meet the Eligibility Criteria

Confirm that you do not receive HRA.
Ensure that you do not own residential property in the same city.

Step 2: Maintain Rent Payment Records

Pay rent regularly and keep rent receipts, bank statements, and a rental agreement as proof.

Step 3: Fill and Submit Form 10BA

Form 10BA is mandatory and must be submitted online before claiming the deduction.
The form includes details such as:

• Name of the landlord
• Rent paid
• Rental property address
• Declaration of no self-occupied property ownership

Step 4: File Your Income Tax Return (ITR)

While filing your Income Tax Return (ITR), mention the amount claimed under Section 80GG.
Attach relevant documents like rent receipts and Form 10BA.

Documents Required for Section 80GG

To claim tax deductions under Section 80GG, the following documents are required:

Form 10BA – Declaration confirming rent payment and eligibility.

Rent Receipts – Must contain:

• Landlord’s name, address, and signature.
• PAN of the landlord (if annual rent exceeds ₹1 lakh).

Rental Agreement – A legal document proving tenancy.

Proof of Income – Salary slips or bank statements showing rental payments

Common Mistakes to Avoid While Claiming Section 80GG

Not Filing Form 10BA

• Form 10BA is mandatory and without it, your deduction claim may be rejected.

Incorrect Rent Calculation

• Ensure that you calculate the rent correctly, excluding maintenance or other charges.

Claiming When HRA is Received

• If your salary includes HRA, you cannot claim Section 80GG deductions.

Missing Rent Receipts or Agreement

• Always keep rent receipts and agreements as proof of payment.

Incorrect Ownership Status

• If you own property in the same city, you are not eligible to claim this deduction.
   

Conclusion

Section 80GG is a crucial tax-saving provision for individuals who pay rent but do not receive HRA from their employer. It allows eligible taxpayers to claim deductions on rent paid, reducing their taxable income.

By understanding the eligibility conditions, deduction calculations, and documentation requirements, you can effectively claim tax benefits under this section. Ensure that you maintain rent receipts, file Form 10BA, and avoid common errors while filing your Income Tax Return (ITR).

If you qualify for Section 80GG, make sure to take full advantage of this tax-saving opportunity and reduce your tax burden legally.