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80GG – Deduction in respect of rent paid

80GG is a deduction under Chapter VI-A of the Income Tax Act, 1961. It has been introduced to provide relief to those individuals who do not receive any house rent allowance but are paying rent for the stay. Thus, an individual can claim a deduction for rent paid even if he or she does not get house rent allowance.

An individual, to claim deduction under this section, should be self-employed or a salaried one. 80GG allows the individuals to claim a deduction in respect of house rent paid. Such house rent paid shall be for his or her own stay.

Deduction under Section 80GG

The following conditions need to be met to claim deduction under this section:

  • The individual should not be in receipt of any House Rent Allowance from his employer.

  • The individual has filed a declaration in Form No 10BA.

  • The assesse or his spouse or minor child or HUF of which he is a member, should not own any residential house property at the place where he ordinarily resides or performs office duties or causes his business or profession.

  • The assesse should not own any residential accommodation in his or her own occupation, at any other place, whose value is to be determined as per Sec 23(2)(a) or Sec 23(4)(a).

In simpler words, if Mr. A, in his income tax return, claims a deduction in respect of self-occupied property and pays rent for a place in which he ordinarily resides but not of his own, he shall not be able to claim deduction under 80GG section

Quantum of deduction shall be the least of the following:

  • Actual Rent paid minus 10 percent the adjusted total income.

  • 5,000/- per month.

  • 25% of Adjusted Total Income.

Exceptions under Section 80GG:

-An individual cannot claim a deduction on house rent if the location of the house is situated where he/she is employed or operates the business.

  • An individual cannot claim a deduction on house rent if he or she is claiming the benefit of an owned house as self-occupied property in another location. If the individual is living in one city and has a house in another place or town it will be considered as rented out.

If an individual is living with his father and mother in their house, then he/she can claim the benefit of rent deduction as per the section 80GG. He/she will need to make a rental agreement with parents in order to get the rent deduction. However, the mother and father whoever own the house will have to show the rent as income in their tax returns. If the house is jointly owned by the son/daughter then they cannot claim rent deduction benefit on their taxable income.

FAQs on Section 80GG

What is the adjusted total income under section 80GG?

Adjusted total income refers to income not including long term and short-term capital gains. Here, only those short-term capital gains shall be excluded which are taxed at 10% that is u/s 111A.

Also, adjusted total income refers to income excluding income u/s 115A to 115D and deductions from 80C to 80U.

The adjusted total income means: -

Gross Total Income less Long Term Capital Gain less Short Term Capital Gain subject to tax at 10% less deductions under sections 80C to 80U less income from the foreign company.

It is to be noted that 80GG shall not be included in the above deductions from 80C to 80U.

What are the details required to be submitted for claiming deduction u/s 80GG?

The details required to be submitted are:

  • Name of the assessee
  • PAN
  • Full address of the premises along with Postal Code
  • Tenure (in months)
  • Payment Mode
  • Amount Paid
  • Name of landlord
  • address of the landlord.
  • PAN of the landlord is mandatory if rental is more than INR 1 lakh for the assessment year.
  • A Declaration confirming that no other house property is owned by the taxpayer himself or in the name of Spouse / minor child or by the HUF of which he is a member.

It is applicable to all categories of individuals?

it is applicable to both Resident and Non-resident.

Mr. R, a businessman, whose total income (before allowing deduction u/s 80GG) for A.Y 2018-19 is INR 5,60,000/-. He paid a house rent of INR 12,000 per month in respect of residential accommodation occupied by him at Mumbai. What will be the deduction available?

It will be computed as follows:

  • Actual rent Paid – 10% of total income - ( 12,00012 )- ( 10% 5,60,000): 88,000

  • 25% of total income - 25% *5,60,000: 1,40,000

  • 5,000 per month: 60,000

Deduction available will be INR 60,000/-

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