Section 80GG: Eligibility, Deduction Limit, & How to Claim?

Section 80GG, a special provision under Chapter VI-A of the Income Tax Act, 1961, offers significant tax relief to individuals who pay rent but do not receive House Rent Allowance (HRA) from their employer. This deduction applies to both salaried and self-employed professionals, enabling them to claim financial relief on rental expenses. To qualify, individuals must reside in a rented property and ensure that HRA is not part of their monthly compensation. This 80GG tax-saving opportunity allows tenants to reduce their taxable income and make the most of this beneficial provision. This article provided detailed information on Section 80GG Deduction, eligibility, deduction limit, method of calculation and how to claim.

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What is Section 80GG Deduction?

Section 80GG of the Indian Income Tax Act provides a deduction for rent paid by individuals who do not receive House Rent Allowance (HRA) from their employer. The maximum deduction allowed under Section 80GG is Rs. 5,000 per month or 25% of the total income, whichever is lower, subject to specific eligibility criteria, such as not owning residential property in the place of employment.

Who is Eligible for 80GG Deduction?

To claim a deduction under Section 80GG, taxpayers must satisfy specific eligibility criteria outlined by the Income Tax Act. Here are the conditions for eligibility:

Self-Employed or Salaried Individuals: The deduction is available only to individuals who are either self-employed or salaried employees.
No Claim of HRA: The individual must not have received any House Rent Allowance (HRA) from their employer.
No Owned Residential Property: Neither the individual nor their spouse or minor child should own a residential property in the city where they reside, work, or conduct business.
No Spouse or Minor Child Ownership: If an individual's spouse or minor child owns a residential property in the same city where the individual works, they are not eligible for the deduction.
No Parental Property: If the individual resides in a property owned by their parents and pays rent to them, they cannot claim the deduction.
Rent Paid for Accommodation: The deduction applies only to the rent paid towards accommodation, including payments for a furnished or unfurnished house, apartment, or flat.
Income Limit: While there is no specific income limit, the deduction is capped at a maximum of Rs. 5,000 per month or 25% of the individual's total income, whichever is lower.
Declaration in Form 10BA: The individual must file Form 10BA with details such as rent paid, the landlord's name and address, and the address of the rented property.
Proper Rent Receipts: Proper rent receipts must be maintained as evidence of rent payment. The receipts should include the landlord's name, address, rent amount, and rental period.
Filing of Income Tax Return: The deduction can only be claimed if the individual files their income tax return within the due date specified under the Income Tax Act.

Meeting these conditions ensures eligible taxpayers can use Section 80GG to reduce their taxable income through rent-related deductions.

What is the Section 80GG Deduction Limit?

Under Section 80GG of the Income Tax Act, individuals can claim a deduction for rent paid, provided specific conditions are met. The Section 80GG deduction limit is calculated as the lowest of the following three amounts:

Rs. 5,000 per Month: As per the Budget 2016 revision, the maximum deduction is Rs. 5,000 per month, increased from the earlier limit of Rs. 2,000 per month.
25% of Total Income: This is calculated based on the individual’s adjusted total income.
Excess of Rent Paid over 10% of Total Income: The deduction applies to the rent paid that exceeds 10% of the individual’s adjusted total income.

Documents Required to Claim Section 80GG Deductions

To claim deductions under Section 80GG, individuals must provide specific documents to ensure their eligibility for the tax benefits. The key documents required include:

Form 10BA: This form must be duly filled out and submitted to claim deductions under Section 80GG. It serves as a declaration of rent payments made by the taxpayer.
Landlord’s PAN: If the rent paid exceeds Rs. 1 lakh annually, the PAN details of the landlord must be provided.
Landlord’s Name and Address: The name and address of the landlord are necessary to establish the details of the rental agreement.
Payment Details: Documentation showing the payment method, the amount paid, and the tenure of the rental agreement must be provided to substantiate the claim.
Assessee’s Details: The PAN, name, and address of the assessee (the taxpayer) are also required to verify the claim.

These documents are essential for supporting the claim for deductions under Section 80GG and must be submitted accurately to ensure proper processing of the deduction.

How to File Form 10BA?

Form 10BA is an essential declaration form that taxpayers must file to claim Section 80GG deductions. It can be obtained from various sources, like the HR Department of your organisation, income tax office, or online.

Details Contained in Form 10BA

The following details must be accurately filled to ensure the validity of your claim under Section 80GG.

Your name and PAN details.
Full address of your current residence.
Payment mode used for the rent.
Tenure of residency in months.
Rental amount paid during the tenure.
Property owner's address.
Declaration that neither you nor any family member owns any other residential property.
Rented property owner's PAN details (mandatory if rent exceeds ₹1 lakh annually).

Form 10BA - Sample Template

Below, we have attached the Form 10BA PDF for your reference,

How can Property Owners claim an 80GG Tax Deduction?

Property owners can claim deductions under Section 80GG by meeting the following criteria:

The property owner must pay rent for a home where they reside.
The property they own should not be located in the same town or region as their place of employment.

It is important to note that Section 80GG deductions are not applicable if the property owner chooses to live in a rental property despite owning a house in the same city.

Is Rent paid to Parents allowed as a Deduction?

Yes, rent paid to your parents can be claimed as a deduction under House Rent Allowance (HRA), provided certain conditions are met. The key requirement is that there must be a formal lease agreement in place between you and your parents. Additionally, your parents must be the legal owners of the property and should not have any outstanding home loan in your name for the property. If these conditions are satisfied, you can claim the rent paid to your parents as part of your HRA deduction, just as you would for any other landlord.

Conclusion

Section 80GG provides a valuable opportunity for individuals who do not receive House Rent Allowance to claim tax deductions on rent payments, easing their financial burden. By meeting the eligibility criteria, maintaining proper documentation, and filing Form 10BA accurately, taxpayers can effectively utilize this provision to reduce their taxable income. Whether you're self-employed, salaried, or a property owner fulfilling specific conditions, Section 80GG offers a straightforward way to gain relief on rental expenses while adhering to the Income Tax Act's guidelines.

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