What is Section 80GG?

  • It is a deduction under the Income Tax Act’s chapter VI A.
  • It allows an exemption to both salaried as well as self-employed individuals living on rent with neither a HRA component nor a rent free accommodation in their salary.

How much amount can you claim as deduction under Section 80GG?

Under this section, you can claim the least of the below applicable amounts:

  • 60,000 annually (Rs. 5,000 monthly)
  • Excess of Rent Paid over 10% of “Adjusted Total Income”.
  • 25% of the “Adjusted Total Income”.

Adjusted total income means the Gross Total Income as reduced by :

  1. Long Term Capital Gains
  2. Short Term Capital Gains u/s 111A
  3. All deductions permissible u/s 80C to 80U except deduction under this section.
  4. Income referred to in section 115A, 115AB, 115AC or 115AD. These sections have special rate of taxes applicable on income of NRI’s and Foreign Companies etc.

For instance, Mr. A’s annual income is ₹5 lakhs. He pays ₹ 1.5 lakhs yearly rent for which he does not receive any HRA from his firm. He can save tax under Section 80GG by claiming the least of the following:

  1. ₹60,000 per annum
  2. Rent paid by him that is ₹ 1.5 lakhs minus ₹ 50,000 (10 % of annual income) = ₹ 1 lakh
  3. 25% of his total yearly income = ₹ 1.25 lakh

Since the first choice is the least of all three calculations, Mr. A would only be eligible for a tax benefit of ₹ 60,000.

How to claim a tax deduction under 80GG

You need to file a declaration with form 10BA along with the return of Income to save tax under Section 80GG for the rent paid to your landlord for a financial year. Apart from your PAN, you need to fill your full name and address of the rented accommodation with postal code along with the duration of stay.

The amount paid towards rent, as well as the mode of payment such as cheque or cash, needs to be disclosed. Name and address of your landlord are required. It is mandatory to share the PAN of the landlord if the annual rent paid by you is above ₹ 1lakh.

The assessee or his spouse or his minor child or a HUF of which he is a member should not own any accommodation at the place where he ordinarily resides or perform duties of his office or employment or carries on his business or profession.

The assessee should fulfill such other conditions or limitations as may be prescribed, having regard to the area or place in which such accommodation is situated and other relevant considerations.

Who cannot claim tax deduction under 80GG?

  • This deduction is allowed only to an Individual.
  • Employees receiving HRA from their company.
  • If you or your spouse or a minor child or the HUF that you are a part of, have their own house in the same city as the rented house.