Section 80GG

Introduction

Section 80GG of the Income Tax is a significant provision under Chapter VI-A of the Income Tax Act, 1961, designed to provide tax relief to individuals who do not receive House Rent Allowance (HRA) from their employers. This section enables eligible individuals to claim deductions on rent paid, thereby reducing their taxable income.

Who Can Claim Deductions Under Section 80GG?

To claim deduction under Section 80GG, individuals must meet specific criteria:

1. Eligibility: Only individuals and Hindu Undivided Families (HUF) can claim deductions under this section. Businesses and other entities are excluded.

2. Employment Status: Both salaried individuals and self-employed professionals can claim deductions. However, individuals who do not have any income cannot claim this benefit, even if they pay rent.

3. No HRA Component: The individual must not receive HRA as part of their salary. This provision is specifically for those who do not get HRA from their employer.

4. Form 10BA Submission: To claim deductions under Section 80GG, the individual must submit Form 10BA. This form is a declaration that neither the individual nor their spouse, minor child, or HUF owns a self-occupied residential property at any location.

5. PAN Card Requirement: If the annual rent exceeds ₹1 lakh, the taxpayer must submit the PAN card details of the property owner to claim the tax deduction.

6. Residential Status: Non-resident Indians (NRIs) can also claim deductions under this section, provided they are paying rent for a property in India.

You may also want to know Section 80CCD (1) and 80CCD (2)

How the Deduction under Section 80GG is Calculated?

Section 80GG provides tax deductions for individuals who do not receive House Rent Allowance (HRA) but still pay rent for their accommodation. To claim the deduction under Section 80GG, the following calculation is used:

1. Eligibility:

To be eligible, the taxpayer must be a salaried employee, self-employed, or a pensioner who does not receive HRA. Additionally, the taxpayer or their spouse should not own any residential property in the place where they reside, work, or carry out their business.

2. Calculation of Deduction:

The deduction amount under Section 80GG of Income Tax is the lowest of the following three values:

Actual rent paid minus 10% of the adjusted total income.
₹5,000 per month (i.e., ₹60,000 annually).
25% of the adjusted total income.

3. Adjusted Total Income:

It refers to the gross total income of the taxpayer, excluding long-term capital gains, short-term capital gains under Section 111A, and other deductions like Section 80C to 80U.

Example Calculation:

If a taxpayer has an adjusted total income of ₹6,00,000 and pays ₹8,000 per month as rent, the deduction would be calculated as:

Actual rent paid minus 10% of adjusted income = (₹8,000 x 12) – (10% of ₹6,00,000) = ₹96,000 – ₹60,000 = ₹36,000.
₹5,000 per month = ₹60,000 annually.
25% of adjusted income = 25% of ₹6,00,000 = ₹1,50,000.

The lowest of these three values, i.e., ₹36,000, would be the deductible amount under Section 80GG.

Example of Section 80GG Deduction Calculation

Consider two individuals, A and B, with different income levels 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
Deductions Applicable
	Rs.50000	Rs.42000

Filing Form 10BA

Form 10BA is a crucial document for anyone looking to claim Section 80GG deductions. It includes details such as:

Full address with postal code.
Name and PAN of the assessee.
Mode and tenure of rent payment.
Rental amount and details of the property owner.
Declaration that the assessee, spouse, or minor child does not own any residential property.

How to Access Form 10BA?

Form 10BA is a declaration that the taxpayer must file to claim a deduction under Section 80GG. It confirms that the individual, spouse, or minor child does not own any residential property in the city where the taxpayer is claiming rent deduction. The steps to access Form 10BA are:

1. Visit the Income Tax e-Filing Portal: Go to the official Income Tax Department e-filing website

2. Login with Credentials: Enter your PAN (Permanent Account Number), password, and Captcha code to log in to your account. If you are a new user, register yourself on the portal first.

3. Navigate to ‘e-File’ Section: Once logged in, click on the ‘e-File’ tab and select ‘Income Tax Forms.’

4. Select Form 10BA: Choose ‘Form 10BA’ from the list of available forms. Make sure you select the correct assessment year.

5. Fill Out the Form: Complete the form by entering details like the taxpayer’s name, PAN, address of the rented property, rent paid, and period for which the rent was paid. Double-check the information to ensure it is accurate.

6. Submit the Form: After filling in the details, click ‘Submit’ to file Form 10BA. You will receive an acknowledgment once the form is successfully submitted.

Accessing and filing Form 10BA is mandatory for those who wish to avail of the deduction under Section 80GG. It ensures that taxpayers are transparently declaring their rent expenses and eligibility for deductions.

Claiming Deductions as a Property Owner

Property owners can claim Section 80GG deductions of Income Tax Act if:

They are paying rent for a property where they currently reside.
Their property is in a different city or location from their workplace.

If the property owner lives in a rented property within the same city as their owned property, they cannot claim this deduction. However, if they own property in another city, the owned property is considered let out.

Documents Required for Section 80GG

To claim deduction under this section, the following documents are required:

Form 10BA, duly filled and submitted.
Assessee’s name, PAN, and full address.
Tenure, amount, and mode of rent payment.
Declaration of ownership status.
PAN details of the landlord if the rent exceeds ₹1 lakh annually.

Conclusion

Section 80GG is an essential provision for individuals who pay rent but do not receive HRA from their employer. By understanding the eligibility criteria, calculation methods, and required documentation, taxpayers can effectively reduce their taxable income and enjoy significant tax benefits.

Frequently Asked Questions

Who can claim tax deductions under Section 80GG?

Only individuals and HUFs who do not receive HRA from their employer and pay rent can claim tax deductions under Section 80GG.

Can self-employed individuals claim deductions under Section 80GG?

Yes, self-employed individuals can claim deductions under this section, provided they meet the eligibility criteria.

Is Form 10BA mandatory for claiming Section 80GG deductions?

Yes, Form 10BA must declare that the taxpayer does not own a self-occupied property and is paying rent.

Can NRIs claim Section 80GG deductions?

Yes, NRIs can claim this deduction if they pay rent for a property in India.

What happens if I receive HRA for a part of the year?

If you receive HRA for any part of the year, you cannot claim Section 80GG deductions for that year.

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