Section 80GG: Deduction of Rent Paid

Very few taxpayers are aware about this section, while this section has lots of benefits and available for Salaried as well as Businessman also.

Section 80GG of the Income Tax Act, 1961 is a provision that allows individuals to claim deductions on the rent paid for accommodation when they do not receive House Rent Allowance (HRA) from their employer.

It is applicable to individuals who are self-employed or salaried but do not receive HRA as part of their salary.

Here are some key points about Section 80GG:

1. Eligibility Criteria: To claim deductions under Section 80GG, an individual needs to satisfy certain conditions. The individual must be a resident of India and not receive any HRA from their employer. Additionally, they or their spouse or minor child should not own any residential property in the city or town where they are employed or carry on their business.
2. Deduction Amount: The deduction under Section 80GG is limited to the least of the following amounts:
   • a. Rent Paid minus 10% of Total Income: The deduction is calculated as the amount of rent paid by the individual minus 10% of their total income.
   • b. 25% of Total Income: The deduction is limited to 25% of the individual’s total income for the year.
   • c. Rs. 5,000 per month: The maximum deduction that can be claimed under Section 80GG is limited to Rs. 5,000 per month. This limit applies regardless of the actual rent paid by the individual.
3. Documentation: To claim the deduction, individuals need to submit a declaration in Form 10BA stating that they are eligible for the deduction under Section 80GG. This declaration should be provided to the employer or while filing the income tax return.
4. Filing of Income Tax Return: When filing the income tax return, individuals can claim the deduction under Section 80GG. The deduction will be applied while computing the taxable income.

It’s important to note that the individual needs to keep proper records and receipts of the rent paid as proof in case of any scrutiny by the tax authorities.

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