Section 80GG: Tax Deduction on the Rent Paid

House Rent Allowance (HRA) typically is a part of your income, for which you can claim an income tax deduction. Section 80GG of the Income Tax Act, 1961, provides tax benefits for individuals residing in rented accommodations when HRA is not included in their monthly salary.

Both salaried and self-employed professionals who meet the requirements may take advantage of the deduction under Section 80GG. Therefore, both business owners and salary earners can avail themselves of this specific tax deduction.

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 unde section of the ITA.

Some of the requirements that someone must meet in order to claim the Section 80GG deduction are listed below:

Only individuals and HUFs are eligible for these deductions
Businesses and other entities cannot claim the same tax benefits for rent payments
Applicants must submit Form 10BA to declare no benefits from property that is self-occupied
Submission of the homeowner's PAN card copy is required for annual rents over ₹1 Lakh
Those who claimed HRA in the financial year, even if for only one month, are ineligible for this deduction, including job changers

Individuals living in their parent’s home are also eligible to apply for Section 80GG benefits. One would have to execute a rent 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

Form 10BA is mandatory 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
Assessee's name and PAN
Payment method
Residency tenor
Rental charge
Contact information for the property owner

Declaration stating that the assessee, their spouse, minor child, or the HUF they are a member of do not own any other house property

If the annual rent exceeds ₹1 Lakh, the owner of the rental property must provide their PAN number

Which Property Owners Can Benefit from Tax Deductions

Property owners can only avail deductions under Sec 80GG of the Income Tax Act if they meet the following two requirements:

They must be currently residing in a property and paying rent for it
The property or properties they own shouldn't be close to where they work or live

The section 80GG deduction eligibility does not extend to those who own property in the city and yet live on rent in the same 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 classified 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).

₹5,000 per month or ₹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 benefits.

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?

Self-employed individuals or employees without HRA throughout the fiscal year can claim deduction under 80GG, provided they reside in a rented house.

Can I claim Section 80GG benefits with my parents?

Yes. Individuals residing in their parent’s property are also eligible to claim benefits under Section 80GG. 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
₹5,000 per month or ₹60,000 annually
Total rent amount should not exceed 10% of the total income.

Is Section 80GG Deduction applicable to home rent allowance?

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

Why do I need Form 10BA to avail of tax deductions?

Form 10BA serves as a declaration by individuals seeking to claim a deduction under Section 80GG for rent paid on a rental property when filing their ITR.