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Section 80GG

Under the chapter VI-A of the Income Tax Act of India, 1961, section 80GG is a deduction for house rent payments. According to this section, if you are a self-employed or salaried individual staying in a house and paying rent for it every month, without receiving an HRA (House Rent Allowance), you are eligible for tax deductions in the house rent paid. The house rent here refers to the rent the individual pays for his/her stay.

This chapter VI-A also specifies the maximum amount that can be availed by an individual from the section 80GG. It amounts up to Rs 5000 per month or Rs 60,000 per annum. The amount received by an individual under section 80GG depends upon the individual's monthly income or salary, city of residence (whether it comes under Tier I or Tier II or Tier III), the rent amount, and based on other such vital information.

Form 10BA must be filled, specifying the appropriate information to claim section 8GG.

Features of section 80GG:

Here is a rundown to the key features of section 80GG of the Income Tax Act, 1961:

  • This section, as per the Income Tax Act of India 1961, focuses on the tax deduction of individuals who do not receive House Rent Allowances benefits from his/her employers
  • Individuals who reside in a rented house or apartment can claim their share of tax exemption through this section
  • This section 80GG under Chapter VI-A is applicable only for individuals who are self-employed or salaried or a member of HUF (Hindu United Family)
  • It does not apply to companies or corporations
  • The individual claiming this section 80GG under Chapter VI-A must not receive House Rent Allowance benefits
  • The individual claiming this tax exemption must not own properties under their spouse’s or minor child's name
  • The HUF in which the individual is a member should not own any residential properties
  • The individual claiming this tax deduction must fill the 10BA form which requires basic information like the salary of the occupant, city in which the occupant resides, rent paid by the occupant, whether or not the occupant owns any residential properties in any location or in the exact location that he/she is employed
  • The PAN card of the owner of the house in which the occupant is residing must be submitted in case the rent amount exceeds Rs 1 Lakh per annum
  • The claim can be placed even if the house that the occupant is paying rent for is fully or semi-furnished
  • The claim cannot be placed if the individual rents a house at the place where he/she is employed or operates his/her business

How much amount can be rebate be availed?

Criteria Amount availed
Maximum amount  Rs. 60,000 per annum or Rs. 5,000 per month
% of annual salary  25% of annual salary
Formula Actual rent paid – 10% of total income

The individual can claim any one of the rebuttals mentioned above amounts. The maximum amount that can be availed through section 80GG under chapter VI-A according to the Income Tax Act of India, 1961, is Rs 60,000 per annum or Rs 5000 per month. 

In case of the rent amount exceeding Rs 1 Lakh per annum, the occupant must submit the PAN card of the owner of the house in which he/she is residing. The amount availed, as noted before, depends on the annual income of the occupant.

According to this section, 25% of the occupant's annual wages is provided to the occupant. The amount is calculated using a formula which states that the amount provided to the occupant by the section 80GG under chapter VI-A is the actual rent paid minus 10% of the occupant's total income.

Eligibility Criteria for Claiming Tax Rebate under Section 80GG under Chapter VI-A:

  • This section 80GG under Chapter VI-A is applicable for individuals who are self-employed or salaried or a member of HUF (Hindu United Family)
  • It does not apply to companies or corporations
  • The individual claiming section 80GG under Chapter VI-A must not receive HRA (House Rent Allowance) benefits
  • The PAN card of the owner of the house in which the occupant is residing must be submitted in case the rent amount exceeds Rs 1 Lakh per annum
  • The claim can be placed even if the house that the occupant is paying rent for is fully or semi furnished
  • The claim cannot be placed if the individual rents a house at the place where he/she is employed or operates his/her business

Example 1:

Say a person named Shalini earns Rs 8 Lakh (after subtracting all the taxes and deductions). She is staying in a rented apartment complex, and her employer doesn't provide her with House Rent Allowance benefits. If the annual rent paid by Shalini is Rs 2 Lakh, she has to submit a copy of her house owner's PAN card to place her claim for tax rebuttal.

According to the table, as stated before, Shalini can claim any one of the rebuttals amounts from the following three options:

  • Shalini can claim a maximum amount of Rs 60,000 per annum or Rs 5000 per month
  • 25% of her annual salary – Rs 8 Lakh equals Rs 2 Lakh
  • Shalini can avail of an amount that is equal to the rent paid minus 10% of the income. Which implies, Rs 2 Lakh – 10% (Rs 8 Lakh) = Rs 1,20,000

According to the section 80GG under chapter VI-A of Income Tax Act of India 1961, Shalini can claim the least amount from the three. Hence, she can receive an amount of Rs 60,000 per annum.

Example 2:

Say a person named Ramesh earns Rs 5 Lakh (after subtracting all the taxes and deductions). He is staying in a rented apartment complex, and his employer doesn't provide him with HRA (House Rent Allowance) benefits. If the annual rent paid by Ramesh is Rs 1 Lakh, he has to submit a copy of his house owner's PAN card to place his claim for tax rebuttal.

According to the table, as stated before, Ramesh can claim any one of the rebuttals amounts from the following three options:

  • Ramesh can claim a maximum amount of Rs 60,000 per annum or Rs 5000 per month
  • 25% of his annual income – Rs 5 Lakh equals Rs 1,25,000
  • Ramesh can avail of an amount that is equal to the rent paid minus 10% of the net income. Which implies, Rs 1 Lakh – 10% (Rs 5 lakh) = Rs 50,000

According to the section 80GG under chapter VI-A of Income Tax Act of India 1961, Ramesh can claim the least amount from the three. Hence, he can receive an amount of Rs 50,000.

Example 3:

Say a person named Ayush earns Rs 7 Lakh (after subtracting all the taxes and deductions). He is staying in a rented apartment complex, and his employer doesn't provide him with HRA (House Rent Allowance) benefits. If the annual rent paid by Ayush is Rs. 1 Lakh, he has to submit a copy of his house owner's PAN card to place his claim for tax rebuttal.

According to the table, as stated before, Ayush can claim any one of the rebuttals amounts from the following three options:

  • Ayush can claim a maximum amount of Rs 60,000 per annum or Rs 5000 per month
  • 25% of his annual salary – Rs 7 Lakh equals Rs 1,75,000
  • Ayush can avail an amount that is equal to the rent paid minus 10% of the net income. Which implies, Rs 1 Lakh – 10% (Rs 7 Lakh) = Rs 30,000 

According to the section 80GG under chapter VI-A of Income Tax Act of India 1961, Ayush can claim the least amount from the three. Hence, he can receive an amount of Rs 30,000.

How the Rebate is Calculated?

Three methods can calculate the rebuttal amount. The claimer can avail of the amount that is least among the three. The three methods are:

  • The claimer can avail a maximum of Rs 60,000 per annum or Rs 5000 per month
  • 25% of the annual salary received the claimer can be obtained as rebuttal amount
  • An amount that the equal to the rent paid minus 10% of the total amount can be obtained as the rebuttal amount by the claimer

Of the three methods, the least amount is provided to the claimer as the rebuttal amount.

How to Claim the Rebate under Section 80GG?

The claimer has to fill out the form 10BA, which requires certain necessary information like the income of the occupant, city in which the occupant resides, rent paid by the occupant, whether or not the occupant owns any residential properties in any location or in the exact location that he/she is employed.

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Written By: Paisawiki - Updated: 11 November 2020