Table of Contents
In general, the House Rent Allowance or HRA is a component of the salary of an individual, and the individual can claim tax deductions on the HRA if they are living in a rental property and paying monthly entails.
However, sometimes the individual does not receive HRA from the employer but has to make payments towards the monthly rentals of their unfurnished or furnished living accommodation, which they currently occupy. In such cases, the individual could claim for deductions, as per Section 80GG of the Income Tax Act, 1961, on the amount paid towards monthly rentals.
The taxpayer has to, however, fulfil a few conditions to become eligible for tax deductions under Section 80GG.
The list of conditions to become eligible for tax deductions under Section 80GG of the Income Tax Act are as follows:
The individual needs to file Form 10BA along with payment details of the monthly rentals to apply for tax deductions under Section 80GG.
The lowest value out of the following will be considered for 80GG deductions on the monthly rentals:
Example 1:
Ravi earns a total annual income of ₹5 lakhs (after all the deductions) and is staying in a rented property and not getting any HRA or House Rent Allowance. He pays a total annual rent of ₹1.5 lakhs. In this case, the lowest value out of the below-mentioned conditions would be considered for deductions:
Condition 1: ₹5000 every month, which amounts to ₹60,000 per year.
Condition 2: 25% of total income = ₹1.25 lakhs.
Condition 3: The rental paid minus 10% total income i.e. ₹1.5 lakhs – ₹50,000 = ₹1 lakh
Therefore, condition 1 has the lowest amount. Thus, Ravi can apply for tax benefits as per the amount in condition 1.
Example 2:
Ravi earns a total annual income of ₹3 Lakhs (after all the deductions) and is staying in a rented property and not getting any HRA or House Rent Allowance. He pays a rent of ₹6000 every month and the total annual rent of ₹72,000. In this case, the lowest value out of the below-mentioned conditions would be considered for deductions:
Condition 1: ₹5000 every month, which amounts to ₹60,000 per year.
Condition 2: 25% of total income = ₹75,000.
Condition 3: The rental paid minus 10% total income i.e. ₹72,000 – ₹30,000 = ₹42,000
In this case, condition 3 has the lowest value, and therefore, Ravi qualifies for tax benefits as per the condition 3.
1) What is the adjusted total annual income under Section 80GG?
Adjusted total annual income under Section 80GG refers to the income excluding the short-term and long-term capital gains (only short-term capital gains that are subject to 10% taxation as per Section 111A are excluded) and excluding the income under Section 115A to 115D and tax deductions from 80C to 80U.
The adjusted total income is:
Gross total income minus long term capital gain minus short term capital gain that is subject to 10% taxation minus deductions under Section 80C to 80U minus income from a foreign company.
Note: Section 80 GG deductions are not included in deductions from 80C to 80U.
2) Is Section 80GG applicable to all categories of individuals?
Yes. Both residential and non-residential individuals qualify for deductions under Section 80GG.
3) What are the details needed to be submitted to claim deductions under Section 80GG?
The details that you need to submit, include:
4) I receive the HRA in my salary. Can I avail tax deduction under Section 80GG?
No. If you receive HRA as a component of your salary from the employer, and you are already availing tax benefits against the HRA under relevant sections of the IT act, then you cannot file for tax benefits under Section 80GG.
Section 80GG is only for those salaried individuals who don’t receive HRA as a salary component.
5) How much amount can I claim as tax benefit under Section 80GG?
You can claim for deductions under Section 80GG on the lowest value out of the following scenarios:
An individual can take advantage of tax benefits under Section 80GG over and above the tax benefits under different sections of the Income Tax Act. So, if you are living in rented accommodation who doesn’t receive HRA in your salary, and you don’t own a house property at your work or business location or at any other location within the union of India, then certainly go ahead and make the fullest of this tax-saving opportunity.
For any organisation, it's essential to have a good employee onboarding process. It's a process…
In today's fast-paced business world, the role of Human Resources (HR) has become more critical…
Introduction Providing professional development opportunities to employees can significantly impact their productivity and performance at…
ATS stands for "Applicant Tracking System." It is a computer program designed to help companies…
Hiring is among the most challenging activities for HR managers. They need to battle a…
The EPF or Employee Provident Fund plays a vital role in the financial life of…