Regular post-retirement income | Additional tax benefit on investments up to ₹50,000 u/s 80CCD (1B) - EEE Category | Regulated by PFRDA (Pension fund regulator under Ministry of Finance, Govt. of India)

Section 80GG of the IT Act, 1961

The Income Tax Act of 1961's Chapter VI-A includes a specific provision known as Section 80GG that offers tax savings to taxpayers who do not use the house rent allowance. A person must live in a rented home in order to be qualified for a tax deduction under this section. Additionally, his or her company shouldn't include a house rent allowance (HRA) in the monthly salary.

 

Both salaried and self-employed professionals who meet the requirements may take advantage of the Section 80GG deduction. As a result, everybody who owns a business is eligible to claim this particular tax deduction, just like their counterparts who earn a salary.

Who Can Claim Tax Deductions Under Section 80GG?

As previously stated, there are requirements that must be met in order to qualify for tax deductions under this particular section of the ITA. Some of the requirements that someone must meet in order to claim the Section 80GG deduction are listed below.

 

  • These tax deductions can only be claimed by individuals and Hindu Undivided Families (HUF). Businesses and other enterprises are not permitted to receive the same tax breaks while paying rent within a specific fiscal year.

  • This benefit is available to people who work for themselves or are salaried professionals. Even though a person pays rent, they are not eligible to apply for Section benefits if they have no income at all.

  • To be eligible for this tax rebate, applicants must first send the government a properly filled out Form 10BA. This form serves as a declaration that the person submitting it makes no claims about any benefits from a self-occupied property.

  • The section was created especially for people whose employers do not provide housing benefits. A person is ineligible to file for income tax refunds for housing rent if his or her salary includes an HRA payment.

  • The taxpayer will need to submit a copy of the homeowner's PAN card if the annual rent exceeds Rs. 1 lakh in order to be eligible for tax benefits. Remember that the person renting out the space must be the owner of the PAN card.

  • An individual is not eligible for the tax benefit under Section 80GG if they have ever claimed HRA during the fiscal year in question. For those who have changed jobs over the past 12 months, this is an important point. Even if one does not receive HRA for the majority of the year, receiving it for just one month disqualifies one from being eligible to receive this annual reprieve.

People who live with their parents in a home that belongs to their parents are also qualified to apply for Section 80GG assistance. One would have to execute a rental agreement with their parents in order to achieve this. Additionally, when the parents submit their yearly taxes, the sum listed as rent will be subject to taxation.

 

This clause also allows Non-resident Indians to seek tax benefits. To apply for the same, they must, however, be renting a house in India.

How to Complete Form 10BA Correctly?

As previously mentioned, Form 10BA is necessary for anyone wishing to take advantage of Section 80GG tax benefits. Before submitting Form 10BA, the following information must be filled out:

 

  • Complete address and zip code

  • The assessee's name and PAN

  • Payment method

  • Residency tenure

  • Rental charge

  • Contact information for the property owner

  • No other residential property is owned by the assessee, his/her spouse, or any minor children, according to a declaration

  • If the annual rent exceeds Rs. 1 lakh, the owner of the rental property must provide their PAN number.

How Do Property Owners Utilize Section 80GG Tax Deductions?

Property owners can only use Section 80GG deductions if they meet the following two requirements:

 

  • They must be currently residing on a property and making rent payments on it.

  • The property or properties they own shouldn't be close to where they work or live. Section 80GG does not apply to their yearly income taxes if they choose to live in a rental flat despite owning property within the city.

While collecting the rent benefits in the city where they work, one can own property in another city or region. In this scenario, the owned property is seen as being rented out.

How Are Deductions Calculated Under Section 80GG?

The Tax Rule 2A provides the foundation for tax deductions under this section. The lowest sum from the subsequent calculations is regarded as non-taxable income in accordance with Section 10(13A).

 

  • Rs.5,000 per month or Rs.60,000 annually.

  • The amount of the annual rent less 10% of the taxpayer's adjusted gross income

  • 25% of the yearly adjusted total income.

Keep in mind that only the lowest of the three values determined for an individual qualifies for the Section 80GG deduction.

Frequently asked question

  • ✔️What is Section 80GG?

     Section 80GG is a provision in the ITA of 1961 that provides tax benefits for individuals who do not receive house rent allowance (HRA).

  • ✔️Who is eligible for 80GG deduction?

     Any self-employed individual or employee who has not received House Rent Allowance (HRA) at any time during a particular financial year can claim deduction under 80GG provided he/she lives in a rented house.

  • ✔️Can I claim Section 80GG benefits with my parents?

    Yes. People who live with their parents in a home that belongs to their parents are also qualified to apply for Section 80GG assistance. One would have to execute a rental agreement with their parents in order to achieve this.

  • ✔️What are the tax benefits of rent?

     If you are paying rent and not availing HRA, you can get the lowest of the below three amounts as a tax benefit.

    • 25% of annual salary

    • ₹60,000 annually

    • Total rent amount - 10% of the total income

  • ✔️Is Section 80GG Deduction applicable to home rent allowance?

    No, Section 80GG is only applicable to those individuals who do not avail House Rent Allowance (HRA) by the employer.