Section 80gg

Section 80GG is a specific provision under Chapter VI-A of the Income Tax Act of 1961 that gives tax relief to persons who do not claim housing rent allowance.

A person must live in a rented home in order to be qualified for a tax deduction under this section. Additionally, his or her company shouldn't include a house rent allowance (HRA) in the monthly salary.

Professionals who are entitled for a salary and self-employment deduction may use Section 80GG. As a result, everybody who owns a business is eligible to claim this particular tax deduction, just like their colleagues who earn a salary.

What is 80GG?

Section 80GG of the Indian Income Tax Act is a deduction applicable on the rent you pay if you do not receive House Rent Allowance (HRA) from your employer. The maximum deduction is Rs. 5,000 per month or 25% of your total income, whichever is lower. 

Self-employed or salaried employees can claim this deduction by submitting a Form 10BA declaration with their income tax return. Those who own residential property in the same city where they work or conduct business are not eligible for the deduction.
 

Who is Eligible to Claim Tax Deductions under section 80GG?

Here are the eligibility criteria for claiming tax deductions under section 80GG.

●    Self-employed or Salaried Individuals: To claim an 80GG deduction, an individual must be either self-employed or a salaried employee. 

●    No Owned Residential Property: Individuals who own a residential property in the same city where they work or conduct business are not eligible for the deduction under section 80GG. The deduction is only available for individuals who do not own any residential property in the city where they work.

●    Rent Paid for Accommodation: The deduction for the rent paid towards the individual's accommodation is available. It includes any payments made towards rent for a furnished or unfurnished house, apartment, or flat.

●    No Spouse or Minor Child Ownership: If an individual's spouse or minor child owns a residential property in the city where they work, they are not eligible to claim the deduction under section 80GG.

●    No Parental Property: If an individual resides in a property owned by their parents and pays rent to them, then they are not eligible for the deduction under section 80GG.

●    No Benefit of HRA: Individuals who do not receive any House Rent Allowance (HRA) from their employer can claim the deduction under section 80GG. However, if an individual receives a part of the HRA from their employer, then they can claim a deduction only for the remaining amount not covered under the HRA.

●    Income Limit: No specific income limit for claiming a deduction under section 80GG. However, the deduction is limited to a maximum of Rs. 5,000 per month or 25% of the individual's total income, whichever is lower.

●    Declaration in Form 10BA: To claim the deduction under section 80GG, the individual must submit a declaration in Form 10BA along with their income tax return. The form requires details such as the amount of rent paid, the name and address of the landlord, and the property's address.

●    Proper Rent Receipts: It is essential to have proper rent receipts as evidence of the rent paid towards the accommodation. The rent receipts must include the name and address of the landlord, the rent amount paid, and the rental period.

●    Filing of Income Tax Return: The deduction under section 80GG can only be claimed if the individual files their income tax return within the specified due date. Failure to file the income tax return within the due date may result in disqualification of the deduction.

How are Deductions Under section 80GG Calculated?

Section 80GG of the Indian Income Tax Act allows individuals to claim a deduction for rent paid towards accommodation. The maximum deduction is Rs. 5,000 per month or 25% of the total income, whichever is lower.

To calculate the deduction, individuals must subtract 10% of their total income or Rs. 5,000 per month from the total rent paid for the year. The deduction amount is the lower end of the remaining amount or Rs. 60,000 per year. The table below shows how the 80GG deduction amount is calculated for three individuals.
 

Individual X can claim a deduction of Rs. 22,000 under section 80GG, as the remaining rent paid is less than the maximum deductions and 25% of their annual income.

Individual Y can claim a deduction of Rs. 60,000, the maximum deduction, as it is lower than the remaining rent paid and 25% of their annual income.

Individual Z can claim a deduction of Rs. 37,500, 25% of their annual income, as it is lower than the remaining rent paid and the maximum deductions.

Filing Form 10BA

Form 10BA is a declaration filed by a taxpayer who wishes to claim a deduction for rent paid on rental property under section 80GG. The following are the steps to file Form 10BA.

1.    Obtain a copy of Form 10BA from the Income Tax Department's website or your nearest tax office.
2.    Fill in the required details, such as your name, PAN, address, and the financial year for which the declaration is being made.
3.    Declare the amount of rent paid along with the name and address of the landlord.
4.    Provide details of the property being rented, including the address and the duration of the lease agreement.
5.    Confirm that you do not receive HRA from your employer and the reason for the same.
6.    Sign and date the declaration and submit it with your income tax return for the relevant financial year.

Ensuring that all the details mentioned in Form 10BA are accurate and truthful is essential. Failure to provide the correct information could result in penalties or legal action by the Income Tax Department.

From Where can This Form be Accessed?

You can access Form 10BA from the official website of the Income Tax Department. It is also available at the nearest tax office or from tax consultants. The form can be downloaded, printed, filled in and submitted as per the guidelines mentioned in the form.

How Can Property Owners Claim Tax Deductions under section 80GG?

Section 80GG only applies to individuals who don't own a residential property in the city where they reside or work. Property owners can claim tax deductions under other sections of the Income Tax Act, such as sections 24 and 80C.

If a property is let out on rent, deductions can be claimed under sections 24 and 26.

Documents Required

To claim tax deductions under section 80GG for rent paid on residential accommodation, the following documents are required.

●    Name, address and PAN details of the assessed
●    Proof of rent paid, such as rent receipts, showing the amount paid and the duration it was paid, with the mode of payment.
●    A declaration in Form 10BA states that the individual has not received any House Rent Allowance (HRA) from their employer during the financial year for which they claim deductions.
●    Proof of ownership of any other residential property, if applicable.
●    PAN details of the landlord if the rent exceeds Rs. 1 lakh annually.
●    Proof of income, such as salary slips, bank statements or income tax returns, to compute the limit of 10% of the total income.

It is important to ensure that all the documents provided are accurate and up to date to avoid any discrepancies while claiming tax deductions under section 80GG.
 

Conclusion

Section 80GG benefits individuals without HRA by allowing deductions for rent paid, reducing tax liability. Form 10BA and rent receipts can be used to avail of this provision.