Paying Rent can be a significant financial burden, especially in urban rental markets. But did you know you can save taxes on rental expenses, even if you don’t receive House Rent Allowance (HRA)? That’s where Section 80GG of the Income Tax Act, 1961, comes into play. This provision helps individuals claim tax deductions on Rent paid, providing relief to those without HRA benefits.
Section 80GG serves as an important tax relief measure for individuals not receiving HRA benefits. However, strict documentation compliance is necessary. If you qualify, make sure to file Form 10BA, attach rent receipts, and claim deductions properly while filing your Income Tax Return (ITR).
In this article, we will explore Section 80GG, explaining eligibility, deduction limits, and step-by-step guidance on claiming tax benefits through Income Tax Return (ITR) filing.
Understanding Section 80GG and Its Importance
Section 80GG allows taxpayers to claim tax deductions on rental expenses, provided they do not receive HRA from their employer. This Deduction is available under Chapter VI-A of the Income Tax Act and is designed to assist self-employed individuals, salaried employees, and those without HRA provisions.
Eligibility Criteria for Claiming 80GG
To claim deductions under Section 80GG, the taxpayer must satisfy the following eligibility conditions:
| Individual Taxpayers | No HRA Benefit | Residential Status and Ownership Conditions |
|---|---|---|
| Only individuals and Hindu Undivided Families (HUFs) can avail of this Deduction. | The taxpayer must not be receiving HRA as part of their salary structure. | The taxpayer must be residing in a rented accommodation. |
| Companies, LLPs, and other business entities are not eligible. | If HRA is included in the salary breakup, this Deduction cannot be claimed. | The taxpayer should not own residential property in the same municipality or city where they are claiming the Deduction. |
| Applies to both salaried professionals and self-employed individuals. | If the taxpayer owns a house in another city, it should not be claimed as a self-occupied property. |
How to Calculate Deduction Under Section 80GG?
The Deduction under Section 80GG is determined based on the lowest of the following values:
- ₹5,000 per month (₹60,000 per financial year)
- 25% of Adjusted Gross Total Income (AGTI)
- Rent paid minus 10% of AGTI
Example Calculation
- Monthly Rent Paid: ₹15,000
- Annual Rent Paid: ₹1,80,000
- Adjusted Gross Total Income (AGTI): ₹6,00,000
Step-by-Step Deduction Calculation
- Fixed deduction limit: ₹5,000 per month = ₹60,000 per year
- 25% of AGTI: ₹1,50,000
- Excess Rent Over 10% of AGTI: ₹1,80,000 – (₹60,000) = ₹1,20,000
Since the lowest value is ₹60,000, this is the maximum Deduction the taxpayer can claim.
Documents Required for Claiming 80GG
To claim deductions under Section 80GG, the taxpayer must submit:
- Form 10BA (Declaration confirming non-receipt of HRA)
- Rent receipts with landlord’s PAN (if Rent paid exceeds ₹1 lakh per year)
- Rental agreement and lease contract (if applicable)
- Income Tax Return (ITR) Filing Documentation
Common Mistakes to Avoid When Filing for 80GG
- Failure to submit Form 10BA (A mandatory requirement).
- Claiming the Deduction while receiving HRA (which is disallowed).
- Incorrect landlord details (Mismatch in PAN or rental agreement).
Difference Between Section 80GG and HRA Exemption
| Feature | Section 80GG | HRA Exemption |
|---|---|---|
| Who can claim? | Salaried & Self-employed individuals | Only salaried employees |
| HRA required? | No | Yes |
| Maximum Deduction | ₹60,000 per year | Based on salary & rent paid |
Recent Updates and Budget Amendments
As per the latest Income Tax Act amendments:
- The ₹5,000 monthly limit under Section 80GG remains unchanged.
- The Central Board of Direct Taxes (CBDT) is reviewing rental deduction policies.
- Future budget announcements may increase this limit due to rising urban rental costs.
FAQs
Can NRIs claim deductions under Section 80GG?
No, Section 80GG is applicable only to Indian residents.
What happens if I claim 80GG while receiving HRA?
The claim will be rejected, and penalties may apply.
Can I claim 80GG if my Rent is paid in cash?
Yes, but valid rent receipts and a rental agreement must be provided.
Do I need my landlord’s PAN to claim 80GG?
Yes, if the annual Rent paid exceeds ₹1 lakh.
Will the government increase the deduction limit in the future?
It is under review by the Finance Ministry, and upcoming budgets may announce changes.
