Before getting into the 80GG Income Tax, let’s first gain precise knowledge about what income tax acts are. In simpler words, the income tax acts are a set of rules and regulations according to which the Income Tax Department charges, regulates, collects, and recovers taxes from the Citizens of India. How many sections and chapters does it contain? It contains 298 sections, 23 chapters, and several important provisions containing all the taxation aspects in India.
However, certain things need to be understood in order to understand section 80GG fully. So, for this purpose, we have brought this blog where we will be sharing the relevant information that must be known to the people if they are claiming using this section. Therefore, read the guide below and gain essential knowledge about Section 80GG Income Tax.
80GG Income Tax: A guide to the ITR section
What is Section 80GG of ITR? If we simply define the section, the Section 80GG Income Tax Act offers tax deductions to individuals who are paying house rent without receiving House Rent Allowance (HRA) from their employer, as included in their salary. It is applicable for all the salaried or self-employed people spending their expenses on rent, but not receiving the HRA.
In other words, HRA is a part of your salary slip, and if you don’t receive it even after paying for your accommodation then you are eligible to claim a deduction under section 80GG of ITR, referring to the rent you pay.
| Frequent Questions – Q – Is it possible to avail deductions under both Section 80GG and HRA simultaneously?Ans. One can’t claim a deduction under Section 80GG and HRA at the same period. |
Also Read:- What is Section 80C of the Income Tax Act | Section 112A of the Income Tax Act
Eligibility Requirements to claim the deduction
It must be noted that a person wishing to claim the deduction under Section 80GG Income Tax Act has to fulfill certain eligibility requirements. Nobody is eligible to claim it without qualifying certain boundaries set by the Income Tax Act. Here, we are gonna discuss the requirements to be fulfilled by the people to claim the deduction.
Who is eligible to claim the deduction? – Eligibility and Exemptions
- Taxpayers must not be receiving any HRA benefits. If receiving any during a year or month, they will be exempted from claiming the deduction.
- Taxpayers must be salaried or self-employed, paying the rent but not receiving the HRA.
- Taxpayers, their wives, and children must not be residing in the same place as their work or business. This ensures that the deduction is claimed by genuine taxpayers who are spending rent on accommodation but not receiving the HRA for the same.
- Taxpayers must not have any other property in another different location, no matter whether it is a source of their income.
- Taxpayers must fill out the 10BA form, along with all the required documents.
- If the amount of the rent that has been paid exceeds Rs 1,00,000 (1 lakh), taxpayers will be required to submit their PAN card.
- If the taxpayers are receiving benefits for a different-location-owned house as Self-Occupied Property, taxpayers can’t claim a deduction for house rent. This is because owning a residence in one city while having a property in a different city/town is considered as being leased out.
- Only individuals of Hindu Undivided Families (HUF) can claim these tax deductions.
- Individuals living with their parents in a property owned by their parents can claim Section 80GG benefits.
- Non-resident Indians can also claim tax benefits under this section.
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How deductions under the section 80GG is calculated?
There are certain ways in which the percentage of deductions is calculated. People are going to claim a deduction through this section must know the criteria by which the deductions are calculated in this section. It should be noted that the deduction limit under this section is based on the Tax Rule 2A. Here, we have shed light on this aspect of the section.
In this category, you are eligible to receive the smallest amount from the following options:
- The amount of total rent paid is subtracted by 10% of the total income.
- Irrespective of the total rent paid, the maximum deduction applicable is Rs 5,000/month.
- Rs 2,000 or 25% of total adjusted income can be deducted.
| Frequent Questions – Q. What is adjusted total income?Ans. The adjusted Total income is the individual’s earnings for a year, excluding long-term capital gains or short-term capital gains (as per section 111A) and any other incomes under sections 115A, 115AB, 115AC, or 115AD. |
How to fill out the 10BA form?
Certain details have to be filled out in the form in order to claim the deduction. However, to fill out the form correctly, taxpayers have to follow the below-mentioned steps clearly to avoid any inconvenience. Here, we have mentioned the steps to be followed for filling out the 10BA form.
Steps to apply:
- Obtain the 10BA form through the official webpage of the Income Tax Department.
- After that, you have to fill out the form by entering basic details like your name, PAN number, address, assessment year, etc.
- In the next step, enter your business details like name and address.
- After the above step, enter investment details like the amount to be invested and the date of the investment.
- You now have to attach the required documents and sign the declaration.
- Next will be the verification step.
- You can now submit the form.
Documents required
- The landlord must provide their PAN if the rent exceeds Rs.1 lakh.
- The landlord’s name and address.
- Method of payment, amount, and duration.
- Taxpayer’s name, PAN, and address.
- Rent Receipts
- Rent Agreement
- Declaration in Form 10BA
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How are property owners eligible to claim a deduction under section 80GG?
Yes, property owners can also claim a deduction under the 80GG income tax act. However, certain criteria must be fulfilled by the owners if they wish to claim a deduction under the 80GG section. Below, we have discussed the requirements fulfilling which property owners can also claim a deduction under the Section 80GG.
- The property owners must be paying rent for a property in the same place where they are currently residing.
- The property or properties they own must not be in the same location as their workplace.
- If they own a property in a place but decide to rent an apartment, they are not eligible to claim a deduction under this section.
| Frequent Questions – Q – What if the rent is Rs 50,000?Ans. If the rent amount exceeds Rs. 50,000, a 5% tax will be taken out for one month or less within the fiscal year |
80 GG Section: Pros & Cons
As we know, each section has its own benefits and limitations, which must be known to the accessor if they are claiming something using a particular section. Similarly, the 80GG income tax act also has its own pros and cons and be considered before using this section. Here, we have provided information on the advantages and disadvantages of the section 80GG.
Advantages
- One of the major benefits of this section is that it provides deductions to taxpayers who are paying the rent for their accommodation but not receiving HRA from the employer.
- This section is beneficial for low-income people or people who are at the start of their careers.
- Furthermore, it helps in reducing the tax liability.
- This section is accessible to both salaried and self-employed people.
Disadvantages
- One of the primary limitations of this section that the maximum amount could be deducted is less, i.e., 2,000 per month or 25% of the total income.
- Individuals with higher incomes or those who pay high rent may see only a modest tax benefit from this section.
- This section is not applicable, or you can say beneficial for the people who have high incomes but pay low rent.
- People who qualify for a deduction under Section 80GG are not eligible to receive a tax rebate for the same rent paid through other sections.
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At last
Summarizing the blog, we would say that section 80GG Income Tax offers tax benefits to the people who are paying the rent but not receiving the House Rent Allowance (HRA) from the employer. This section ensures deductions in the rent paid, and all salaried and self-employed people are eligible to claim deductions under this section. However, taxpayers must fulfill certain criteria, including submitting Form 10BA.
Overall, section 80GG provides financial assistance to those who are renting accommodation. So, in this blog, we have provided all the relevant information regarding section 80GG of the Income Tax Act for people looking to claim deductions through this section. Hope this guide proved beneficial for you!
FAQ’s:-
1. What is the maximum limit of the HRA?
Ans. Your HRA must not exceed the maximum limit of 50%.
2. Is maintenance included in HRA?
Ans. No, HRA deductions are only applicable to rent payments. Other charges like electricity, maintenance, utility, etc., are not applicable.
3. What should you do if a landlord refuses to give the PAN?
Ans. There are many instances of such cases where landowners have refused to share their PAN information. In such cases, taxpayers can still claim deductions, they just have to submit a declaration stating the landlord’s unwillingness to share the PAN information.
4. How much rent can be declared?
Ans. The maximum limit for your HRA is 50% of your basic salary. As a salaried worker, you are not eligible to receive reimbursement for the entire rent you are paying.