Renting a house in big cities can be challenging, especially with the constantly increasing prices. If you receive a House Rent Allowance (HRA) from your job or own a house in the city, that’s convenient. However, for those who have to rent without HRA, the costs can significantly burden their finances. Hence, to ease the burden of high rent, the income tax department allows a deduction for rent paid under section 80GG, providing financial relief.
Section 80GG
Section 80GG of the Income Tax Act allows individuals a deduction for rent paid for furnished or unfurnished accommodation. The deduction is allowed to taxpayers who do not receive HRA as a component of the salary from their employer. However, there are certain conditions, if the taxpayer fulfills all such conditions then they are allowed to claim a deduction under this section.
Conditions to claim a deduction u/s 80GG
- Only Self-employed or salaried individuals paying house rent are allowed to claim a deduction.
- Salaried individuals can claim only if they don’t receive a House Rent Allowance as a component of their Salary.
- Individuals or their spouses or minor children or HUF in which they are a member do not own residential accommodation at the place of employment or where they are residing or carrying business or profession.
- Individuals should not own self-occupied residential accommodation at any other place.
- Individuals have to file Form 10BA before claiming this deduction by opting for the old tax regime.
- If the rent amount exceeds INR 1,00,000 then the taxpayer has to provide the PAN of the property owner while claiming the deduction.
- The taxpayer should not claim HRA at any time during the financial year. Hence, if the taxpayer has changed the job in between the financial year and has received the HRA from the previous employer then they will not be liable to claim a deduction u/s 80GG.
Deduction limit u/s 80GG
The allowable deduction under this section will be the least of the following:
- Total rent paid less 10% of total income
- 25% of the total income
- INR 5000 per month i.e INR 60,000 annually
Note: Total income for this section means Gross total income less all deductions under chapter VI-A (except 80GG).
Calculation of deduction amount u/s 80GG
Let’s understand the calculation 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 INR 20,000 per month as rent for a year and his total income is INR 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 a deduction under section 80GG even though he is a salaried individual. The deduction will be the lowest of the following:
- INR 1,20,000 (INR 20,000*12 months – 10% of INR 12,00,000)
- INR 3,00,000 (25% of INR 12,00,000)
- INR 60,000 (INR 5,000*12 months)
Therefore, Sharad can claim a deduction of INR 60,000 for rent paid by him during the year provided he files Form 10BA first.
Exceptions to Section 80GG
With respect to claiming deductions under this section, there are certain exceptions that one needs to take care of:
- One cannot claim a deduction under section 80GG if he/she is claiming a deduction on a house property that they owns at another location.
- One cannot claim a deduction u/s 80GG on house rent if they own a house in the location they are employed in or are doing business in.
ITR Form Applicable for Section 80GG
The taxpayer can claim deductions u/s 80GG while filing ITR by fulfilling the above conditions. Individuals can claim 80GG in any of the ITR forms, i.e., ITR 1, ITR 2, ITR 3, and ITR 4 depending upon their income sources.
Form 10BA
Form 10BA is the declaration to be filed for claiming the deduction under section 80GG. In this form, the taxpayer needs to declare that they are not claiming the benefit of a self-occupied property on the house in any other location or the same location as they are employed.
Supporting Documents
Apart from the usual documents like Form 16 and PAN, you will need the following documents to file Form 10BA:
- Name, PAN, and full address of the taxpayer.
- Tenure, amount, and payment mode.
- Name and address of the landlord.
- PAN Details of the landlord, if the rent amount exceeds INR 1,00,000.
FAQs
No. You cannot claim deduction under section 80GG if you or your spouse or children own a house property at your ordinary place of residence or office or employment and if you own a house property anywhere in India.
Yes, you can claim a deduction for rent paid up to INR 60,000 even if you are self-employed provided all conditions are satisfied.
Only an individual can claim a deduction for rent paid under this section.
No, deduction under section 80GG is only available to individuals who do not get House Rent Allowance (HRA) as a Salary component.
No, section 80GG is part of Chapter VI-A. The New Income Tax regime doesn’t allow any exemptions under Chapter VI-A. Hence, you cannot claim a deduction under section 80GG.
Hey @sushil_verma
There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.
Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.
For eg,
Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.
The benefit Section 80EEB can be claimed by individuals only. An individual taxpayer can claim interest on loan of an electric vehicle of up to INR 1.5 lacs u/s 80EEB. However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount. (We have updated the article with the changes).
Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR (under your PAN).
As per the Income Tax Act, the deduction under Section 80EEB is applicable from 1st April 2020 i.e. FY 2020-21.
Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback.
No issues. You’re welcome!
Hey @shindeonkar95
In case of capital gain income (LTCG/STCG), transfer expenses are allowed as deduction, except STT.
However, in case of business income (F&O, intraday), all expenses incurred for the business (including STT) are eligible to claim deduction in ITR.
Hope, it helps!
Hello,
Is it possible to claim deductions under S. 80CCF for Infra bonds bought in the secondary market and held to maturity?
There were a number of 10 year infra bonds issued in the 2010- 2013 period, which will start maturing soon. These are all listed on the exchanges (although hardly any liquidity or transactions in them). If I were to buy some of these bonds in the open markets and hold them in my demat to maturity (<3 years), is it possible to claim tax deductions (upto 20k per year) under 80CCF for buying?
I couldn’t find anything on this. Any help is appreciated.
Hello @Veejayy,
Yes you can claim deduction under 80CCF for investment made in specified infrastructure and other tax saving bonds bought in the secondary market and held to maturity.
Deduction under Section 80CCF can be availed only through investment in certain tax saving bonds, issued by banks or corporations after gaining permission from the government which shall be restricted upto 10,000 per year.
These bonds are generally long term bonds, having tenure of more than 5 years with a lock in period of 5 years in most of the cases. These bonds can be sold after the lock in period!
Also, interest earned on these bonds will be taxable.
Hope this helps!
Hi, I need to file my income tax for FY21, I am using Quicko platform for filing, I wanted to confirm if the ELSS investment amount for the FY21 is to be added in the section 80C, since I already the amount of Rs30,072 , should I add my ELSS amount to this existing amount and submit the total
Hey @Sheirsh_Saxena, yes, the investment amount needs to be added under 80C.