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Section 80GG | What is Section 80GG Deduction under Income Tax Act |YES BANK

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Taxpayers in India can claim deductions from their taxable income for house rent payment. Usually, house rent allowance (HRA) forms a part of the salary your employer pays. However, if you do not receive HRA, you can claim deductions towards rents you pay for your residential accommodation. Section 80GG under Chapter VI-A of the Income Tax Act (ITA), 1961 allows this tax reprieve.

What is Section 80GG?

This ITA section defines tax deductions applicable for rents paid. You must pay the rent for your own stay. However, if you own a house at the place where you live or work, but decide to rent another house to stay, you cannot get the Section 80GG benefits. You can own property at a different location and claim rent benefits for staying in a rented accommodation in the city where you work.

Under the provisions of 80GG, you can claim deductions for any house rent expenditure exceeding 10% of your total income. But the excess expense must not be more than Rs 2,000 per month or 25% of your total annual income.

Who can avail of the Section 80GG deduction?

Anyone among the following is eligible for the benefits:

  • Any salaried or self-employed individual who does not get HRA but pays house rent

  • NRIs paying rent for house property in India

However, you must satisfy the following criteria, as well:

  • You or your minor child or spouse do not own any residential house at the place you stay or work at or operate a business.

  • You do not own any residential property anywhere for which your income from house property is calculated under relevant ITA sections.

  • Any Hindu Undivided Family, of which you might be a member, is not a title-holder of such an accommodation.

  • You have not received any HRA during the financial year for which you are asking for the deduction.

  • The location of the house for which you are claiming rent benefit is not your workplace or where you run your business.

Moreover, you can get the rent deduction if you are living in your parents' or your spouse's house. But you must have a rental agreement with the actual owner. Also, the owner of the property must show the rent as income in their tax returns. And if you are a joint owner of the property, you cannot claim the benefit.

How to apply for the Section 80GG deduction?

  1. You have to submit Form 10BA before you file your returns to be eligible for this tax rebate. The form is available at tax offices, or you can download it online.

  2. You must provide the details of your rent payment in Form 10BA. Also, you must declare that you do not claim benefit from any self-occupied property in any location.

  3. If your rent amount is more than ₹1 lakh, you need to furnish a photocopy of your landlord's PAN card.

What is the amount of deduction available under Section 80GG?

The permissible deduction is equivalent to the least amount among the following:

  • Total rent minus 10% of your basic salary

  • ₹5,000/ month or ₹60,000/ year

  • 25% of your gross income

The gross income excludes:

  • long-term capital gains

  • short-term capital gains under Section 111A

  • income under Section 115A or 115D

This adjusted total income is before you make deductions under Sections 80C to 80U.

Conclusion

Section 80GG provides relief if you are burdened with house rent but don't get the benefit of HRA. Use this facility and reduce your tax liability without any hassles.

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