Section 80GG of the Income Tax Act allows claiming of the tax deduction for the house rent paid for accommodation.
Not all salaried people are able to stay in their own place. Either due to work being located in distant locations, affordability, or many other problems, personal or otherwise. To ease up their problems, the Government offers Deduction under House Rent Allowance (HRA) part of the salary, under Heads of Income Tax, while ITR filing. Section 80GG of the Income Tax Act allows a deduction for house rent paid by you for your residence.
As long as you are paying rent for any furnished or unfurnished accommodation occupied by you for your own residence.
Conditions u/s 80GG
- You are either salaried or self-employed.
- Any of you, your spouse, your minor child or the Hindu Undivided Family (HUF), that you are a member of, do not own a residential accommodation:
- in the city that you are currently residing in, carrying your business or profession, or performing duties of the office.
- if in any other city, its value of which is to be determined under either Section 23(2)(a) or Section 23(4)(a). Concessions regarding self-occupied house are being claimed by you for that property.
- You have not received HRA at any time during the financial year. In that case, you are to submit the rent receipts to your employer and they will be included in your Form 16, under section 10(13A) of the Act.
- You have filed Form No. 10 BA, declaring that you are not claiming benefit for a self-occupied property in the city of work.
Calculating Deductions u/s 80GG
The Lowest amount of the following 3 will be eligible for the deduction, u/s 80GG:
(a) Rs. 60,000 annually. i.e. Rs. 5,000 per month;
(b) Rs. 25% of your annual salary, before allowing any deduction under this section;
(c) Total rent paid – 10% of (your total income before allowing deduction under this section).
You have an annual income of Rs. 10 lakh, not getting any HRA. You are staying in a rented place. The annual rent you are paying is Rs 2 lakh.
(a) Monthly limit of Rs 5000 p.m. i.e. Rs. 60,000 p.a.
(b) Rent paid i.e. 2,00,000 – 1,00,000 (10 % of annual income) = 1,00,000.
(c) 25% of the annual income = 2.5 lakh.
Since (a) has the least amount, you will be eligible for a deduction of Rs. 60,000 from your annual income.
Form 10 BA
It is basically a declaration to claim deduction under section 80GG. To be filed along with your Income Tax Return. The form is very easily available at all tax offices, the HR department. Or you can download from here.
Below details need to be filled in this form:
- PAN details,
- Address of the rented accommodation,
- Duration of occupation,
- Amount paid,
- Payment mode,
- Name & address of your landlord.,
- If you have paid more than Rs. 1 Lakh as annual rent for this financial year, the PAN details of the landlord is necessary,
- A Declaration that no other residential accommodation is owned by you, your spouse, your minor child or by the HUF of which you are a member.
If all the conditions are being fulfilled regarding your income structure and accommodation, then it would be a smart decision to take benefit of this section.
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