Section 80GG Of The Income Tax Act

Section 80GG deduction provides tax benefits to individuals who pay rent for their residence in the city where they live.

It is important to understand who is eligible and the extent to which the deduction can be claimed to benefit from a deduction under 80GG.

Here is a simple guide about everything you need to know about 80GG in income tax.

What is Section 80GG Deduction?

Section 80GG of the Income Tax Act provides a tax deduction for individuals who pay rent for their residence in the city where they live for employment or business reasons. It is provided only to taxpayers who do not receive a House Rent Allowance(HRA).

It is available only to a specific category of taxpayers who fulfil certain conditions. Let us understand these 80GG deduction conditions in the forthcoming sections.

Who Can Claim The Section 80GG Deduction?

• Category of Taxpayers- Section 80GG tax benefit is available only to individuals and Hindu Undivided Families (HUFs). It does not apply to companies or any other category of taxpayers.
• Employment Status- Only self-employed and salaried individuals who do not receive House Rent Allowance can benefit from Section 80GG deduction.
• Tax Regime- Section 80GG deduction applies only to taxpayers who opt for the old tax regime.

Conditions That Apply To Section 80GG Deduction

• House Rent Allowance- House Rent Allowance(HRA) should not be a part of your salary for claiming tax deductions under 80GG.

If you have received HRA from your employer during the financial year, you cannot claim the Section 80GG deduction. This also applies if you began receiving HRA after switching jobs during the year.

• Ownership and Self-Occupied Property Restrictions (Form 10BA) - It is important that neither you nor your family members own any residential property in the place where you currently reside for job or professional reasons. Also, you should not own a property in any other place that is claimed as self-occupied.
• Parent-owned house property- If you live in a house owned by your parents, you can claim the Section 80GG tax benefit as long as you have a valid rental agreement with them and regularly pay rent.

However, the rental income received by your parents will be taxable under the applicable sections.

• Type of Rented Accommodation- Deductions under Section 80GG of the Income Tax Act shall apply to any rented accommodation that is unfurnished, semi-furnished or fully furnished.

How Much Can I Claim Under Section 80GG Deduction?

The maximum amount you can claim for a deduction under Section 80GG of the Income Tax Act is the lowest of the following:

• ₹60,000 annually or ₹5,000 per month
• 25% of your adjusted total income
• Actual rent paid minus 10% of your adjusted total income

Adjusted Total Income

Adjusted total income under Section 80GG refers to gross total income after subtracting certain applicable deductions, such as the following:

• Long-Term Capital Gains
• Short-Term Capital Gains
• All applicable deductions under Section 80C to Section 80U except under Section 80GG

How Is Section 80GG Deduction Calculated?

Here is a sample illustration to show how deductions under Section 80GG are calculated.

Mr Ritvik earns a gross total income of ₹8,00,000 per annum. He lives in a rented apartment and pays ₹20,000 monthly rent. His investments eligible for Section 80C deductions amount to ₹50,000.

Here is how the Section 80GG tax benefit is calculated.

How To Claim Section 80GG Deduction?

The Section 80GG deductions can be claimed at the time of filing your Income Tax Returns (ITR).

To be able to claim deductions under Section 80GG of the Income Tax Act, it is essential to have certain key documents.

One of the most important documents is the Form 10BA. It declares that you do not own any residential property in your name, your spouse’s name or the name of your minor children or the Hindu Undivided Family (HUF) of which you are a member where you ordinarily reside for residential, employment or professional purposes.

It also declares that you do not own any other residential accommodation in any other place that has been claimed as self-occupied. You can own property elsewhere and still be eligible for Section 80GG deduction, provided that the property is not claimed as self-occupied.

Documents Required To Claim Section 80GG Deduction

• Form 10BA- Form 10BA is a mandatory declaration that you need to provide to claim the Section 80GG tax deduction.  
• Rental Agreement- Keep a copy of your rental agreement signed with your landlord. Although it is not mandatory, it can be helpful when requested by tax authorities.
• Rent Receipts- Maintain your monthly rent receipts paid for the entire financial year. While not mandatory, it is an important proof of evidence to validate your rental payments to your landlord.
• House Owner’s PAN- In case your annual rental amount exceeds ₹1 lakh, the house owner’s PAN is required.
• Other Support Documents- Ensure you have additional supporting documents, such as bank statements and cheque copies, ready to present if requested by tax authorities.

How To Access Form 10BA?

Form 10BA can be easily accessed online. Follow these simple steps to get Form 10BA to claim the Section 80GG tax benefit.

• Step 1: Visit the Income Tax e-Filing portal and log in with your registered credentials.
• Step 2: Under the e-File tab, select “Income Tax Forms”.
• Step 3: Search for “Form 10BA”.
• Step 4: ​You can view the “Deduction of tax at source (Form 10BA), Declaration to be filed by the assessee claiming deduction under Section 80GG”.

Form 10BA can also be obtained offline from any local Income Tax Office.

How To Fill Form 10BA?

After obtaining Form 10BA, you need to fill out the following details. Ensure that you fill out all details accurately to prevent any discrepancies later while claiming the 80GG deduction.

Details Required To Be Filled In Form 10BA

• Your full name and PAN
• Your full address
• Tenure for which you are living in the rented house
• Rent amount
• Mode of rental payment
• Name and address of the owner
• PAN of the owner if the rental amount exceeds ₹1 lakh.

Advantages Of Section 80GG Of The Income Tax Act

• Section 80GG provides a tax deduction for individuals who do not receive HRA.
• The deductions under 80GG also apply to self-employed individuals, unlike other provisions that apply only to salaried individuals.
• Section 80GG is separate from other tax benefits ​related to savings, investments, or deductions under different tax provisions, such as Section 80C and Section 80D.
• It encourages people who cannot afford to own a propertyto opt for rental accommodation.

Integrating Sections 80C and 80D For Comprehensive Tax Benefits

Section 80GG deduction allows for tax benefits on rent paid for individuals who do not receive HRA, including self-employed individuals. To maximise your tax savings, you can also consider deductions under Section 80C and Section 80D.

Section 80C offers tax deduction benefits for savings and investments made in eligible financial products and expenses for specific purposes.

Also Read: Section 80C of the Income Tax Act.

Section 80D provides a tax deduction for the annual health insurance premium. It applies to health insurance plans purchased for self, including family and parents.

Also Read: Health Insurance Tax Deductions

Reliance General Insurance offers various health insurance policies online with customisable benefits to cover a wide range of healthcare expenses.

Frequently Asked Questions About Section 80GG Deduction

1. Can I claim a Section 80GG deduction if the residential property is in the name of my father?

   You can claim a deduction under 80GG as long as you have a valid rental agreement with your father and regularly pay rent.

2. Can self-employed individuals claim deductions under Section 80GG of the Income Tax Act?

   Yes, self-employed individuals can claim an 80GG tax benefit if they fulfil the necessary conditions.

3. Can salaried individuals claim Section 80GG deduction?

   Yes, salaried individuals can claim a Section 80GG deduction if they don’t receive HRA as part of their salary.

4. Can I claim both Section 80GG and HRA?

   No, you cannot claim both HRA and Section 80GG. Section 80GG applies to salaried individuals who do not receive HRA.

5. Can homeowners claim deductions under Section 80GG of the Income Tax Act?

   Yes, homeowners can claim Section 80GG deductions if the property they own is not in the place where they currently reside and pay rent, and it is not claimed self-occupied if present in any other location.

6. What is Form 10BA?

   Form 10BA refers to a declaration form that you need to complete before claiming tax deductions under 80GG. It declares that neither you nor your family members own any residential property in the place where you currently reside for job or professional reasons. It also declares that you do not own a property in any other place that is claimed as self-occupied.

7. Who is an Assessee?

   Every taxpayer who files his or her Income Tax Returns (ITR) for their income earned during a financial year is called an Assessee. In this case of deductions under 80GG, the person claiming the deduction has to file their ITR and will be called the Assessee.

8. What is HRA?

   HRA refers to House Rent Allowance and is a benefit offered to employees by their employers to avail accommodation. It is for the rented accommodation in the city where the employee is working.

9. Can I claim tax deductions under the 80GG deduction under the new tax regime?

   No, the deduction under Section 80GG of Income Tax Act is applicable only to taxpayers opting for the old regime.

10. If I live in rented accommodation in one city and own a house in another city, can I claim a deduction under 80GG?

    Yes, you can claim a deduction under 80GG in this case, provided your house in the other city is not claimed as self-occupied.

Disclaimers:

*T&C Apply. For more details on risk factors, terms conditions, brochure, and exclusions, please read the policy wording and CIS carefully before concluding a sale.

Tax benefits: Tax benefits are subject to conditions under Section 80D of the Act and amendments thereof. The tax laws are subject to amendments/changes from time to time. Please consult your tax advisor for details.