Claim 80GG deduction on Rent for Salaried Individuals

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By Hiral Vakil on February 18, 2019

Salaried individuals who live in rental premises usually get House Rent Allowance(HRA) from the employer. Whether you are receiving HRA or not can be determined from your payslip. Deduction under section 80GG is allowed to a salaried individual subject to certain conditions.   

Who is eligible to claim deduction u/s 80GG?

Salaried Individuals are eligible if:

  • You are paying House Rent,
  • You don’t receive any House Rent Allowance from your employer,
  • You or your spouse or minor children or HUF in which you are a member do not own residential accommodation at the place of employment,
  • You do not own self-occupied residential accommodation at any other place.
  • You file Form 10BA before you claim the deduction.

Non-Salaried individuals are eligible if:

  • You are paying House Rent,
  • You or your spouse or minor children or HUF in which you are a member do not own residential accommodation at the place of employment,
  • You do not own self-occupied residential accommodation at any other place.
  • You file Form 10BA before you claim the deduction.
Tax Savings & Deductions

What is the threshold limit for claiming deduction u/s 80GG?

The lowest of the following is allowed as a deduction:

  1. Total rent paid less 10% of the total income
  2. 25% of the total income
  3. Rs. 5,000 per month i.e, Rs. 60,000 annually.

Let’s understand this with an example: Sharad is a salaried individual who does not receive HRA from his employer and lives in rented premises in Bangalore. Sharad pays Rs. 20,000 per month as rent for a year and his total income is Rs. 12,00,000. Neither Sharad nor his wife owns any residential property in Bangalore or at any other place.

In the above case, Sharad will be eligible to claim deduction under section 80GG even though he is a salaried individual. The deduction will be the lowest of the following:

  1. Rs. 1,20,000 (Rs. 20,000*12 months – 10% of Rs. 12,00,000)
  2. Rs.  3,00,000 (25% of Rs. 12,00,000)
  3. Rs. 60,000 (Rs. 5,000*12 months)    

Therefore, Sharad can claim a deduction of Rs. 60,000 for rent paid by him during the year provided he files Form 10BA first.