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Section 80GG – Save Tax on Rent Paid

Section 80GG - Save Tax on Rent Paid

Buying a house is a daunting task for salaried people in India as it requires huge investment. Even though several banks offer home loans, getting a home loan isn’t easy. If one manages to avail the loan facility, paying hefty instalments for several years is not easy for him. So, most of the salaried people prefer to live in a rented accommodation, at least for the initial period of their career. Understanding the problems of employed citizens, government offers tax deduction on HRA component of salary. Tax deduction on House Rent Allowance is a well-known tax benefit among the masses. However, there is a section of salaried class which does not get HRA or any similar component as part of their salary.

 

If you don’t get HRA

What if you don’t get HRA in your salary from your employer? Well, even if you don’t get such allowance, Income Tax Act has still got you covered. There is less known provision under the Act which allows employed individuals who do not get HRA to claim tax benefit. Section 80GG of the Income Tax Act, 1961 has provisions for such individuals to claim tax deduction if they house rent for their accommodation. To claim benefits under this section, one must satisfy the following conditions:

  • The individual, who is an employee, should not receive HRA or any equivalent allowance from his employer as salary.
  • The employee, his wife or his minor child should not have the ownership of the property where he resides.
  • If the employee is part of a HUF, he or his family should not own the place of his residence.
  • In case the employee owns a place other than his rented place of accommodation then he should not be claiming tax benefit on such property as self-occupied property. Such property would be deemed to be let-out.

Documents Required to claim deduction under Section 80GG

  • Employee needs to furnish documents like rent agreement and rent receipts.
  • If your annual rental payment exceeds Rs. 1 lakh then you also need to furnish PAN details of your landlord.
  • To claim deduction under section 80GG, he also needs to file Form 10BA. This form proves that the employee is not claiming benefit of self-occupied property in any other location or the location where he is employed.

Amount of Deduction Available u/s 80GG

Under section 80GG, you can claim least of the following as tax benefit:

  • Rs. 60,000 per year (i.e. Rs. 5,000 per month)
  • An amount equal to the total rent paid minus 10% of the total income
  • 25% of adjusted total income of employee

So, the least of the above mentioned amount is available as tax deduction irrespective of whether the house is furnished or semi-furnished.

Income Tax deduction under section 80GG is a less known and less claimed deduction. The main reason behind this is that most of the employers give HRA as part of the salary to their employees.

We can understand its calculation with the help of an example. Let’s assume that Mr. Arjun gets an annual salary of Rs. 3,00,000 after all deductions out of which he pays an annual rent of Rs. 1,50,000. In this case, the tax deduction allowed to him would be least of the following:-

  • Rs. 5,000 per month i.e. Rs. 60,000 per annum
  • Rent paid i.e. Rs. 1,50,000 minus 10% of total income i.e. Rs. 30,000 = Rs. 1,20,000
  • 25% of total income i.e. Rs. 75,000

The least of the above can be claimed by him as a tax deduction. So, Rs. 60,000 would be allowed as a deduction under section 80GG for the complete Financial Year. Remember that filing Form 10BA is also needed to avail this deduction.

Here is a sample format of Form 10BA for your reference in case you want to claim this deduction.

How H&R Block can help you?

Saving taxes and e-filing income tax return accurately becomes very easy when you have professional help. This is where we come into the picture. You can either use our intuitive tax filing platform to easily file your tax return or let our tax experts file it for you. We have a team of in-house tax experts who can file your tax returns accurately while giving you maximum tax benefits.

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Neha Joshi
Neha Joshi
Neha Joshi is a Chartered Accountant and an Assistant Manager at H&R Block. She is the Head of Content and is responsible for strategizing the entire content for website, PR and social media. She comes with a rich experience in publishing where she wrote books for various international professional qualifications. She was also a trainer for the subjects she wrote.

11 Comments

  1. DHIRAJ KUMAR says:

    FOR FY. 2016-2017 LAND LORD PAN SUBMISSION IS MANDATORY FOR GETTING BENEFITS OF HRA. TAX REBATE.

  2. Divya Bhanushali says:

    What if My rent paid amount is Rs. 60000 and my (AGTI) Adjusted Gross Total income is Rs.775000, than what would be my Deduction amount under section 80GG?
    Since lowest of Following:
    1) 5000*12= Rs 60,000
    2) 25% of AGTI (i.e. 775000)= Rs. 193750
    3) Rent Paid – 10% of AGTI (i.e 60000- 77500)= -17500

  3. Vishal pandey says:

    I am a bank employee….i live in a rented accomodation for which i have done lease agreement with landlord….I pay a monthly rent of 16000/- rs in which bank contributes 13000/- rs and simultaneously bank adds perquisites in my income as per rules.can i claim benefit under section 80gg And upto what extent.

  4. pradeep sharma says:

    the least of the above mentioned amount is available as tax deduction irrespective of whether the house is furnished or semi-furnished.

    Income Tax deduction under section 80GG is a less known and less claimed deduction. The main reason behind this is that most of the employers give HRA as part of the salary to their employees.

    We can understand its calculation with the help of an example. Let’s assume that Mr. Arjun gets an annual salary of Rs. 3,00,000 after all deductions out of which he pays an annual rent of Rs. 1,50,000. In this case, the tax deduction allowed to him would be least of the following:-

    Rs. 5,000 per month i.e. Rs. 60,000 per annum
    Rent paid i.e. Rs. 1,50,000 minus 10% of total income i.e. Rs. 30,000 = Rs. 1,20,000
    25% of total income i.e. Rs. 75,000
    The least of the above can be claimed by him as a tax deduction. So, Rs. 60,000 would be allowed as a deduction under section 80GG for the complete Financial Year. Remember that filing Form 10BA is also needed to avail this deduction.

  5. praveen says:

    For FY 16-17, I have not given rent receipts to employer so HRA deduction is not made in Form 16, However, HRA is my salary part also.

    Can I show HRA deduction under section 80GG (as my wife resides in some other city) ?

    Pls reply as due to some mistake I have to file revised return.

  6. Rajat Arora says:

    I live in hostel , with hostel fee 1lakh and mess fee is not included in hostel fee. Can I take deduction u/s 80GG

  7. Amit Kumar Bansal says:

    Mam, Your article is impressive: I have a doubt If, I am getting HRA from my employer, but I want to claim u/s 80GG due to the difference in actual HRA and option of 60000/-. I want to claim u/s 80GG because it is higher.

    Should I go for it? and Who?

  8. Thiagarajan G says:

    My mother in law is a family pensioner. Stays in a rented house. Could she claim rent as a deduction and what is the maximum rent without insisting a rent receipt?

  9. Santosh Joshi says:

    If I was employed for 10 months and for the last two months I was self-employed, can I claim 80GG for the last two months in the PY? I received H R A from my earlier employer for the first 10 months.

  10. Manjeet singh says:

    I joined Govt autonomous organisation in oct 2017 t and got HRA also .Can I get tax rebate for April 17-sept 17 in House rent paid by me to my landlord.i received two form 16 from my two employer in 2017-18.how can I fill ITR .Is gratuity received from previous employer is taxable???

  11. Professional says:

    Can the benefit under this section be availed by professionals, who are claiming a 50% flat deduction under sec. 44ADA?

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