Sec 80 GG – Deduction on Rent paid during the year

Sec 80 GG – Deduction on Rent paid during the year

In today world due to fast rising home prices and higher mortgage rates lot of people choosing rent option rather buying the property. Generally, rent expense comprises of approx. 30 % of once total salary. To meet cost of living in a rented accommodation employer usually pay HRA to his/her employees. You as a taxpayer can claim deduction for HRA.

But what if you do not receive any HRA from company and still make payments towards the rent expense? Don’t Worry you can claim deduction under section 80GG towards rent paid by you.

Let us take an overview of Sec 80 GG

Who can claim deduction u/s 80 GG?

· Self-employed or Salaried

· You have not received HRA during FY

· You or your spouse do not own any residential property

· If you are member of HUF then, HUF does not own any residential property

What is a deduction amount u/s 80GG?

The lowest of these will be considered as the deduction under this section-

(a) Rs 5,000 per month

(b) 25% of Adjusted Total Income

(c) Actual rent less 10% of Adjusted Total Income

What is Form 10BA?

It is a declaration that must be filed by an individual who wants to claim u/s 80GG.

You can file Form 10 BA here : -  https://www.incometaxindia.gov.in/forms/incometax%20rules/103120000000007799.pdf

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

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.

Illustration: -

Mr. Prem, a businessman, whose total income (before allowing deduction u/s 80GG) for A.Y 2018-19 is INR 10,00,000/-. He paid a house rent of INR 20,000 per month in respect of residential accommodation occupied by him at Mumbai. What will be the deduction available?

The lowest of these will be considered as the deduction under this section-

(a) Rs 5,000 per month = Rs. 60,000 /-

(b) 25% of Adjusted Total Income

(25 % * 10,00,000) = Rs. 2,50,000/-

(c) Actual rent less 10% of Adjusted Total Income

(Rs. 20,000*12) – (10% - 10,00,000) = Rs. 1,40,000 /-

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