The Indian Income Tax Act provides various tax deductions to individuals for reducing their taxable income. One such deduction is Section 80GG, which allows individuals to claim a deduction for the rent paid if they do not receive House Rent Allowance (HRA) from their employer. In this blog, we will discuss Section 80GG of the Income Tax Act in detail.
Who is Eligible for the Section 80GG deduction? Section 80GG is applicable to individuals who do not receive HRA from their employer but pay rent for their accommodation. However, individuals who own a house in the same city where they are employed, or their spouse or minor child owns a house in that city, are not eligible for this deduction.
What is the amount of the deduction under Section 80GG?
The amount of deduction under Section 80GG is the least of the following:
- Rent paid minus 10% of total income
- Rs. 5,000 per month.
- 25% of total income.
Let us understand this with the help of an example. Suppose Mr. A’s total income for the financial year 2022–23 is Rs. 6 lakh, and he pays a monthly rent of Rs. 12,000. The amount of the deduction that he can claim under Section 80GG is calculated as follows:
Rent paid in a year = Rs. 12,000 x 12 = Rs. 1,44,000 10% of total income = Rs. 6,00,000 x 10% = Rs. 60,000 25% of total income = Rs. 6,00,000 x 25% = Rs. 1,50,000 Rs. 5,000 per month = Rs. 5,000 x 12 = Rs. 60,000
The least of the above three is Rs. 60,000, which is the maximum deduction that Mr. A can claim under Section 80GG.
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Documents required for claiming a deduction under Section 80GG
To claim a deduction under Section 80GG, the taxpayer must provide the following documents:
- Rent receipt: The rent receipt should contain the name and address of the landlord, the amount of rent paid, the period for which it is paid, and the signature of the landlord.
- Declaration: The taxpayer must provide a declaration in Form 10BA, stating that he/she has not received HRA from the employer, does not own a house in the same city, and is paying rent for the accommodation.
Here are some additional details about Section 80GG that you may find useful:
- Applicability of Section 80GG: Section 80GG is applicable to all individual taxpayers, including self-employed individuals who do not receive HRA from their employer but pay rent for their accommodation. However, as mentioned earlier, individuals who own a house in the same city where they are employed or their spouse or minor child owns a house in that city are not eligible for this deduction.
- Calculation of rent paid: To claim a deduction under Section 80GG, the taxpayer must provide the rent paid during the financial year. The rent paid should be the actual amount paid for the accommodation and not the maintenance charges, electricity charges, or any other charges related to the accommodation.
- Limitation on the deduction: The maximum deduction that can be claimed under Section 80GG is Rs. 60,000 per annum. This means that if the rent paid during the financial year is more than Rs. 60,000, the taxpayer can still claim a deduction of only Rs. 60,000. Additionally, if the taxpayer, their spouse, or their minor child owns a house in any other city, they cannot claim this deduction.
- Form 10BA: To claim a deduction under Section 80GG, the taxpayer must provide a declaration in Form 10BA, stating that he/she has not received HRA from the employer, does not own a house in the same city, and is paying rent for the accommodation. This declaration should be submitted along with the tax return.
- Availability of HRA from previous employer: If the taxpayer was receiving HRA from their previous employer and is now not receiving it, they can still claim a deduction under Section 80GG. However, they should not own a house in the city where they are currently employed, and they should be paying rent for their accommodation.
- Claiming deduction for rent paid and home loan interest: The taxpayer can claim a deduction under Section 80GG for the rent paid for the accommodation and also claim a deduction for the interest paid on the home loan taken for a self-occupied property under Section 24 of the Income Tax Act.
Conclusion
Section 80GG is a beneficial provision for individuals who do not receive HRA from their employer but pay rent for their accommodation. By claiming a deduction under this section, they can reduce their taxable income and save tax. It is essential to provide the necessary documents and follow the guidelines to claim this deduction.
Frequently Asked Questions (FAQs)
Q1. What is Section 80GG of the Income Tax Act?
A1. Section 80GG is a provision in the Income Tax Act that allows individuals who do not receive HRA from their employer but pay rent for their accommodation to claim a deduction for the rent paid.
Q2. Who is eligible for a deduction under Section 80GG?
A2. Individuals who do not receive HRA from their employer but pay rent for their accommodation are eligible for deduction under Section 80GG. However, individuals who own a house in the same city where they are employed, or their spouse or minor child owns a house in that city, are not eligible for this deduction.
Q3. What is the maximum amount of deduction that can be claimed under Section 80GG?
A3. The maximum amount of deduction that can be claimed under Section 80GG is Rs. 60,000 per annum. This means that if the rent paid during the financial year is more than Rs. 60,000, the taxpayer can still claim a deduction of only Rs. 60,000.
Q4. What documents are required to claim a deduction under Section 80GG?
A4. To claim a deduction under Section 80GG, the taxpayer must provide a rent receipt and a declaration in Form 10BA stating that they have not received HRA from the employer, do not own a house in the same city, and are paying rent for the accommodation.
Q5. Can an individual claim a deduction under Section 80GG and also claim a deduction for home loan interest under Section 24?
A5. Yes, an individual can claim a deduction under Section 80GG for the rent paid for the accommodation and also claim a deduction for the interest paid on the home loan taken for a self-occupied property under Section 24 of the Income Tax Act.
Q6. Can an individual claim a deduction under Section 80GG if they were receiving HRA from their previous employer and are now not receiving it?
A6. Yes, an individual can claim a deduction under Section 80GG if they were receiving HRA from their previous employer and are now not receiving it. However, they should not own a house in the city where they are currently employed, and they should be paying rent for their accommodation.
Q7. Is there any income limit to claim a deduction under Section 80GG?
A7. No, there is no income limit to claim deduction under Section 80GG. Any individual who meets the eligibility criteria can claim a deduction under this section.
