What is Section 80GG of Income Tax Act?

On this Page: What is Section 80GG? | Who is Eligible to Claim Tax Deductions under Section 80GG? | Section 80GG Deductions and Limit | Frequently Asked Questions about Section 80GG 

What is Section 80GG?

 Section 80GG provides a tax benefit for those individuals who do not avail house rent allowance (HRA) by the employer and live in a rented house. You can claim this 80GG deduction if you do not receive HRA from your employer and make a contribution towards accommodation occupied by you for your own residence.

All salaried, as well as self-employed individuals, can claim this deduction. It is a special provision under Chapter VI-A of the Income Tax Act of India, 1961. Section 80GG exemption limit should either be ₹60,000 annually, 25% of the annual salary or the amount equal to the total rent paid minus 10% of the total income. The lower amount from these three will be the eligible deduction amount.

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

To become eligible for claiming income tax deductions applicable under Section 80GG, you must fulfil several conditions. Here is a look at the eligibility criteria for Section 80GG deduction.

• Only individuals and HUF taxpayers are eligible to claim for 80GG deduction. Entities like businesses or other enterprises cannot claim the tax benefits under the section.

• Salaried employees, as well as self-employed professionals, are eligible for the Section 80GG tax benefits.

• A duly filled Form 10BA has to be filed to the government beforehand to claim the tax benefits. It is a declaration that the individual claiming the deduction does not claim any benefit from a self-occupied property in any location.

• If your salary includes HRA payment, you become ineligible to claim deductions under 80GG. Section 80GG of the Income Tax Act of India is specifically designed for those individuals who do not receive an HRA from their employers.

• If your yearly rent amount is more than ₹1 lakh, you will need to submit a copy of the homeowner’s PAN card to claim the tax benefits. The PAN card must belong to the property owner where you are residing on rent.

• Another important criterion is that the individual must not have claimed HRA at any time during the fiscal year in which he/she is claiming the 80GG deduction. This is important for those who have changed their employer in the year. Even though the individual does not receive HRA for a major part of the year and just receives it for a month, he/she will not be able to claim tax benefits under Section 80GG.

• Those individuals living with their parents are also eligible to claim Section 80GG deductions. For this, the rental agreement has to be signed by his/her parents. However, the amount shown as rent will be liable to tax when the parents file their yearly taxes.

• Non-resident Indians are also eligible to claim tax benefits under this section provided they are paying rent for a property in India.

Section 80GG Deductions and Limit

There are a total of three categories for claiming the Section 80GG deduction. The lowest out of these three will be considered as the deduction amount under the section. Here is a look at the three different categories.

1. ₹60,000 annually/₹5,000 per month

2. 25% of the total income in a year. The income is taken into account before making a deduction under Section 80GG

3. The yearly amount of rent minus 10% of the taxpayer’s total income

To understand the above 3 amounts, here’s an example. Kamal earns ₹7 lakh annually and does not get the House Rent Allowance. He is paying ₹18,000 as rent per month i.e. ₹2.16 lakh annually. Let’s apply the above 3 amounts to understand how many deductions Kamal can claim under Section 80GG of the Income Tax Act of India, 1961.

Under the first point, the exemption amount is ₹60,000. According to point 2, the amount would be ₹1.75 Lakh. As per point 3, the amount is 2,16,000 - 70,000 (10% of the income) = ₹1,46,000.