Section 80GG

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 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.

Who is Eligible to Claim Tax Deductions under Section 80GG?

As stated previously, one must meet certain prerequisites to avail tax deductions under this specific section of the Income Tax Act. Listed below are some of the factors that an individual must fulfil to claim Section 80GG deduction. 

1. Only individuals and Hindu Undivided Family (HUF) are eligible to claim these tax deductions. Businesses or other enterprises cannot avail the same tax discounts upon paying rent in a given financial year.
   
   
2. Individuals who are either salaried professionals or self-employed can take advantage of this provision. If one has no income to speak of, he/she is disqualified from seeking Section 80GG income tax benefits, even if he/she pays rent.
   
   
3. Those seeking to avail this tax rebate need to submit a duly filled Form 10BA to the government beforehand. This Form is a declaration that the individual filing it does not claim to benefit from a self-occupied property in any location.
   
   
4. Section 80GG of Income Tax Act is specifically designed for those who do not receive home rent allowance from their employers. If a person’s salary includes HRA payment, he/she is ineligible to claim income tax rebates related to housing rent.
   
   
5. If the yearly rent amount exceeds Rs.1 lakh, the taxpayer will need to submit a copy of the homeowner’s PAN card to claim tax benefits under Section 80GG of Income Tax Act. Keep in mind that this PAN card must belong to the property owner where one resides on rent.
   
   
6. An individual must not have claimed HRA at any time during the fiscal year for which he/she is claiming the tax benefit under Section 80GG. This is a crucial point for those who have changed employers in the last year.
   
   Even if one did not receive HRA for a major portion of the year, acquiring the same for just a month disqualifies his/her from claiming this yearly reprieve.

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. 

How are Deductions Under Section 80GG Calculated?

80gg deduction limit and 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. 

• Rs.5000 per month or Rs.60000 a year.
• The yearly rent amount minus 10% of the taxpayer’s adjusted total income.
• 25% of the adjusted total income for a year.

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 – 

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.

Filing Form 10BA

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 – 

• Full address with postal code
• Name and PAN of the assessee
• Mode of payment
• Tenure of residency in months
• Rental amount
• Address and name of the property owner
• Declaration stating that the assessee, his/her spouse or minor child do not own any other residential property
• PAN number of the rented property’s owner is mandatory if the amount of rent exceeds Rs.1 lakh in any given financial year.

From Where can This Form be Accessed?

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.

How Can Property Owners Claim Tax Deductions under Section 80GG?

Property owners can only claim 80GG deductions if they satisfy the two major criteria – 

• They must be paying rent on a property where they currently reside.

• The property or properties they own should not be in the same city or location as their workplace. If they own a property within the city but decide to live in a rented apartment, Section 80GG does not apply to their yearly income taxes. 

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. 

Documents Required

Along with the Form 10BA, the following information is provided-

• Assessee's name, PAN, and full address.
• Tenure, amount, and form of payment are all important considerations.
• A declaration that no other dwelling property is owned by the assessee, his spouse/minor child, or the HUF to which he belongs.
• The landlord's name and address.
• If the rent exceeds INR 1 lakh, the landlord's PAN is required.