Section 80GG is a special provision under Chapter VI-A of the Income Tax Act, 1961, which provides tax reprieve to those who do not avail of house rent allowance. To become eligible for tax deduction under this section, an individual must be residing in a rented property. Furthermore, his/her employer should not provide a home rent allowance (HRA) as part of the monthly compensation.
Section 80GG deduction is applicable to eligible salaried and self-employed professionals. Therefore, if an individual operates a business, he/she is just as capable of claiming this particular tax deduction as the salaried counterparts are.
As stated previously, one must meet certain prerequisites to avail tax deductions under this specific section of the ITA. Listed below are some of the factors that an individual must fulfil to claim Section 80GG deduction.
Individuals residing with their parents in a property owned by their parents are also eligible to claim Section 80GG benefits. To do this, one would need to sign a rental agreement with his/her parents. Additionally, the amount shown as rent will be taxable when the parents file their yearly taxes.
Non-resident Indians are also eligible to claim tax benefits under this provision. However, they must be paying rent for a property in India to apply for the same.
Tax deductions under this section are based on Tax Rule 2A. As per Section 10(13A), the least amount from the following calculations is considered a non-taxable income.
Keep in mind that after calculating the three figures for an individual, only the least from them is considered the Section 80GG deduction applicable. Refer to the following table to learn two distinct examples of tax deductions based on different income and rent payments –
|Factors||Individual A||Individual B|
|Adjusted Total Income (ATI)||Rs.200000||Rs.180000|
|Total Yearly Rent Payable||Rs.80000||Rs.60000|
|Deductions under Section 80GG of the Income Tax Act|
|Yearly Rent – 10% of ATI||Rs.60000||Rs.42000|
|25% of ATI||Rs.50000||Rs.45000|
|Rs.5000 per month||Rs.60000||Rs.60000|
As one can clearly perceive from this table, Individual A is liable to receive a higher tax deduction under Section 80GG, primarily because his/her adjusted total income is higher than that of Individual B.
Moreover, the clause where 25% of the ATI is considered as tax discount is applicable in the first case, since the quantum in this calculation is lower than the other two clauses. However, in Individual B’s case, yearly rent minus 10% of ATI gives a lower quantum than the other calculations. Thus, it is the applicable tax deduction for Individual B.
As stated previously, Form 10BA is essential for anyone looking to receive Section 80GG tax benefits. Here are some of the details that one must fill in Form 10BA before submission –
These forms are readily available from a variety of sources, including the human resource department in any reputed organisation. One can also acquire the same from tax offices. However, the easiest place to find one is online. Individuals can search for and download it from various official websites.
Property owners can only claim Section 80GG deductions if they satisfy the two major criteria –
One can own property in a different city or location while claiming the rent benefits in the city where they work. In such a case, the owned property is considered to be let out.
With such information regarding Section 80GG, individuals can reduce their overall tax liabilities by quite an amount without hassle.
Individuals who are self-employed or do not get HRA are the only ones who can claim a deduction under this section.
It is a declaration that must be filed by an individual who wishes to claim a deduction for rent paid on rental property under section 80GG.
Adjusted total income excludes both long-term and short-term capital gains. Only short-term capital gains subject to a 10% tax, as defined by Section 111A, are exempt.
No, you cannot claim a deduction under section 80GG if you are claiming HRA. The benefit can only be used once, either through HRA or Section 80GG.
No, any individual who owns a property is ineligible to receive Section 80GG deductions.