Section 80GG - Deduction for Rent Paid

Roshni Bhagtani

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Section 80GG - Deduction for Rent Paid

The deduction under Section 80GG is included in Chapter VI-A of the Income Tax Act of 1961. It was created for those who do not receive HRA (House Rent Allowance) and live in a rented place.

Usually, HRA is a part of your salary however some employees do not receive HRA. So if you are a salaried person who does not receive HRA as a part of your salary or you are a self-employed individual then you can claim deduction under section 80GG.

Let’s understand section 80GG in detail:

Eligibility for the Deduction

The following conditions need to be met for claiming deduction under section 80GG:

  • An individual must be salaried or self-employed.

  • An individual should not get any house rent allowance at any time during the whole year. If in case you have changed your employer and your new employer provides a house rent allowance so even if you didn't receive an allowance for a major part of the year you will still be disqualified for claiming deduction as per the rules.

  • The individual has filed and submitted form 10BA which consists of a declaration that he or she does not receive any amount of HRA.

  • Only an individual and a HUF (Hindu Undivided Family) can claim the deduction, business and other corporate entities cannot claim deduction under this section.

  • You, your spouse, minor child, or the HUF of which you are a member do not own any residential property in which you now reside, perform office or job obligations, or carry on a business or profession.

Quantum of Deduction

The quantum of deduction shall be the least of the following:

  • Actual rent paid to deduct the amount of 10 percent of the adjusted total income.

  • 5,000/- per month.

  • 25% of the adjusted total income.

Some exceptions under section 80GG

In case you own any residential property at any place and under income from house property it is considered as self-occupied property then you will be not eligible for deduction under section 80GG.

If a person lives with his or her parents, he or she can claim a deduction under section 80GG, but you must first execute a rental agreement with your parents, and the amount indicated as rent income will be taxed under the parent's income.

How a property owner can claim tax deduction under this section

If a property owner meets these three criteria, he or she can claim a tax deduction under section 80GG:

  • You must be paying rent for your current residence.

  • Your property should not be in the same city as your workplace.

  • If your owned property is not in the same location as your residential home. If you own a home and choose to reside in a rented home in the same city, you will not be eligible for a tax deduction under this provision.

Let's look at an example to see how the computation works:

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Deduction under section 80GG:

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We hope this part was helpful in determining whether or not you can claim the deduction. With equiseed wealth, you never have to worry about forgetting to claim deductions again. As you can file your taxes in three simple steps here