Section 80GG: Tax Relief for Rent Paid in India

Section 80GG: Tax Relief for Rent Paid in India

The Income Tax Act of 1961 offers various deductions to reduce your tax burden. Section 80GG caters specifically to individuals who pay rent but don't receive House Rent Allowance (HRA) from their employers. Let's delve into the eligibility criteria, calculation methods, and claim process for this beneficial provision.

Who Can Claim Deduction under Section 80GG?

•       Individuals and Hindu Undivided Families (HUFs): Business entities are not eligible.
•       Salaried or Self-Employed: Income is necessary to claim deductions.
•       No HRA Received: If your salary includes HRA, you cannot claim benefits under Section 80GG. Even claiming HRA for a single month in the year disqualifies you for yearly relief.
•       Form 10BA Submission: This form declares you don't own a self-occupied property anywhere.
•       PAN Card for Landlord (if applicable): If your annual rent exceeds Rs. 1 lakh, you'll need your landlord's PAN card for tax benefits.
•       Renting from Parents: You can still receive benefits if you rent from your parents, but you must have a rental agreement. When your parents do their taxes, they will count the rent you pay as income.    

  Non-Resident Indians (NRIs): You can claim benefits if you pay rent for a property in India.

How Much Deduction Can You Claim under Section 80GG?

The deduction amount is the lowest of the following three calculations:

1.     Rs. 5,000 per month or Rs. 60,000 per year: This is a fixed limit.

2.     Actual Rent Paid minus 10% of Adjusted Total Income (ATI): This considers your income level.

3.     25% of your ATI: This is another income-based calculation.

Example:

Let's compare Individual A and Individual B to understand how deduction amounts vary:

Calculations:

·       Rent - 10% of ATI:

o   Individual A: Rs. 80,000 - (10% of Rs. 2,00,000) = Rs. 60,000

o   Individual B: Rs. 60,000 - (10% of Rs. 1,80,000) = Rs. 42,000

·       25% of ATI:

o   Individual A: 25% of Rs. 2,00,000 = Rs. 50,000

o   Individual B: 25% of Rs. 1,80,000 = Rs. 45,000

·       Fixed Limit: Rs. 60,000 (for both)

Deduction Applicable:

·       Individual A: Rs. 50,000 (as it's the lowest value)

·       Individual B: Rs. 42,000 (as it's the lowest value)

Filing Form 10BA

·       To claim Section 80GG benefits, you must submit Form 10BA. Here's what you'll need to fill in:

•      Your full address and PAN
•      Mode of rent payment
•      Duration of residency (in months)
•      Rent amount
•       Landlord's name and address
•      Declaration stating you, your spouse, or minor child don't own another residential property
•      Landlord's PAN (if rent exceeds Rs. 1 lakh annually)

Where to Find Form 10BA

•         Your HR department (if employed)
•         Tax offices
•         Online through various official websites

Can Property Owners Claim Deduction under Section 80GG?

·       Property owners can only deduct expenses if they pay rent and don't own property in the same city where they work.

Documents Required (For Claiming Deduction)

•         Form 10BA
•         Your PAN and address
•         Details of rent payment (tenure, amount, mode)
•         Declaration about not owning another residential property
•         Landlord's name and address

·       The landlord must provide their PAN if the rent exceeds INR 1 lakh.

·       Claiming Deduction under Section 80GG

·       After collecting all the needed documents and figuring out how much you can deduct, you can request your tax refund. This can be done when you file your income taxes. Here's a general guideline:

·       1.     Prepare your income tax return forms.

·       2.     Include details of your rent payments and the completed Form 10BA.

·       3.     Calculate the deduction amount based on the three options mentioned earlier (fixed limit, rent minus 10% of ATI, or 25% of ATI).

·       4.     Claim the lowest amount as your deduction under Section 80GG.

·       Remember:

•       Consult a tax advisor for personalized guidance, especially if your situation involves complexities.
•       Maintain proper records of rent receipts and Form 10BA for future reference.
•       Timely filing of your income tax return ensures you receive the claimed deductions.

·       Section 80GG offers a welcome tax break for renters in India. To lower your taxes, learn the rules for deductions and how to claim them.