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Section 80GG - Tax Claim Deduction for Rent Paid

Section 80GG enables taxpayers to claim deductions for rent paid, offering relief for accommodation expenses under the Income Tax Act.

  • 2,467 Views | Updated on: Mar 13, 2024

As per the Income Tax Act of 1961, Section 80GG stands out as a crucial provision that extends a helping hand to individuals who bear the financial brunt of renting a home.

Section of the Income Tax Act 1961 provides a pathway for taxpayers who do not receive House Rent Allowance (HRA) from their employers to claim deductions for the rent they pay.

What is Section 80GG?

Section 80GG is a provision within the Income Tax Act that permits a taxpayer or assessee to seek a deduction for the rent expended on their dwelling. This deduction applies to both salaried and self-employed individuals, including those with no income. By leveraging this provision, individuals can effectively decrease their overall tax obligations.

Who Qualifies for the Section 80GG Tax Deduction?

Individuals eligible for a Section 80GG tax deduction are those who pay rent for their residence but do not receive any House Rent Allowance (HRA) from their employer. However, certain conditions need to be met:

  • The assessee should not possess any residential property at their employment or business.
  • The individual, their spouse, or minor child should not own any residential property elsewhere.
  • The individual must refrain from claiming HRA deductions under other sections of the Income Tax Act.

What is the Deductible Amount under Section 80GG?

The deduction amount under Section 80GG is determined based on the following criteria:

  • The maximum deduction allowable is ₹2,000 per month or 25% of the total income, whichever is lower.
  • The rent paid must exceed 10% of the total income.
  • The term “total income” encompasses earnings from all sources, including salary, business, and other avenues.

What are the Advantages of Section 80GG?

Section 80GG of the Income Tax Act 1961 extends a helping hand to individuals who shoulder the weight of rental expenses, offering them a pathway to mitigate their tax liabilities. Some of its advantages are as follows:

Tax Deduction for Rent Paid

Under Section 80GG, individuals who do not receive HRA from their employers can claim tax deductions for the rent paid. This deduction is permissible if the taxpayer or their spouse or minor child does not own any residential accommodation at the location where they currently reside or perform employment duties. Such individuals can claim the least of the following amounts as a deduction:

  • Rent paid minus 10% of the total income
  • 25% of the total income
  • ₹5,000 per month
  • This provision significantly reduces taxpayers’ taxable income, easing their financial burden.

Flexibility in Location

One of the key advantages of Section 80GG is its flexibility concerning the location of the rented accommodation. Unlike HRA exemptions, which are contingent upon the place of employment, Section 80GG allows taxpayers to claim deductions for rent paid irrespective of their workplace location. This flexibility empowers individuals to choose their place of residence based on personal preferences or other factors without compromising their tax benefits.

Inclusion of Self-Employed Individuals

Unlike HRA exemptions, which primarily benefit salaried individuals, Section 80GG also extends its benefits to self-employed individuals. Whether one is a salaried employee, a freelancer, or a business owner, as long as they fulfill the eligibility criteria, they can avail themselves of the tax benefits provided under Section 80GG. This inclusivity ensures that a broader spectrum of taxpayers can benefit from the deduction, promoting equity and fairness in the tax system.

Supplementary to Other Tax Deductions

Section 80GG operates independently of other tax-saving investments or deductions. Therefore, individuals can avail themselves of this deduction in addition to other deductions available under sections such as 80C, 80D, or 80G. This versatility allows taxpayers to optimize their tax planning strategies by leveraging multiple avenues to reduce their tax liabilities effectively.

Encouragement of Rental Housing

Section 80GG incentivizes individuals to opt for rental housing by providing tax relief on rental expenses, thereby stimulating the rental real estate market. This encouragement addresses the housing needs of individuals who cannot afford a property and contributes to the overall growth and development of the rental housing sector.

How to Apply for Deduction under Section 80GG?

To avail of a deduction under Section 80GG, individuals must complete Form 10BA and submit it with their income tax return.

The following details are essential when filling out the form:

  • Rental amount
  • Full address of both the landlord and the assessee
  • Duration of the rental period
  • Rent receipts or evidence of rent payments
  • Basic information about the assessee and landlord, including names and contact details
  • It is advisable to have additional documents like rental agreements and government-issued ID cards on hand in case they are required during the claim process. Additionally, confirming that the employer does not reimburse the rent expenses is crucial.

Wrapping Up

Section 80GG serves as a critical component of India’s tax framework, offering a lifeline to individuals renting a home without the help of HRA. The tax relief provided by this section not only eases the financial burden on renters but also encourages the growth of the rental housing sector.

As individuals go through tax regulations, Section 80GG acts as the government’s commitment to providing inclusive solutions that fulfill the needs of its citizens. For people living on rent, it is a means of availing financial benefits and optimizing their tax deductions.

Key Takeaways

  • Section 80GG provides taxpayers with a deduction for rent paid on accommodation.
  • It caters to various income sources available to both salaried and self-employed individuals.
  • Individuals not receiving House Rent Allowance (HRA) can still benefit from this deduction.
  • The deduction is capped at the lower of ₹2,000 per month or 25% of the total income.

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Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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