Understanding Section 80GG: A Tax Deduction for Rent Paid

What is Section 80GG?

Section 80GG is a provision under the Income Tax Act that allows a taxpayer or an assessee to claim a deduction for the rent paid towards his/her accommodation. The deduction can be claimed by all individuals – salaried or self-employed, including those without any income. The provision helps individuals reduce their overall tax liability.

Who is Eligible for a Section 80GG Tax Deduction?

Any assessee who pays rent for his/her accommodation but does not receive any HRA from his/her employer can claim a deduction under Section 80GG. However, the following conditions must be fulfilled:

• The assessee should not own any residential property at the place of his/her employment or business.

• The individual, their spouse or minor child should not own any residential property at any other place.

• The individual must not claim HRA deduction under other IT sections.

What Is the Total Amount Adjusted for Deduction Under Section 80GG?

The amount of deduction claimed under Section 80GG is subject to the following conditions:

• The maximum deduction that can be claimed is Rs. 2,000 per month or 25% of the total income, whichever is less.

• The rent paid should be in excess of 10% of the total income.

The term “total income” refers to the income earned by the assessee from all sources, including salary, business, and other sources.

Advantages of Section 80GG

One of the main advantages of Section 80GG is that it provides a tax deduction for individuals who do not receive HRA but pay rent for their accommodation. It is particularly beneficial for people with low income or who are at the start of their careers. It further helps reduce tax liability and save more.

Both salaried and self-employed individuals can claim a tax rebate, including those who do not earn.

Disadvantages of Section 80GG

One of the main disadvantages of Section 80GG is that the maximum deduction that can be claimed is limited to Rs. 2,000 per month or 25% of the total income, whichever is less. The tax benefit provided by this section may be relatively small for individuals with higher incomes or those who pay high rent.

Another disadvantage of Section 80GG is that the rent paid must be in excess of 10% of the total income. It means that individuals paying a low rent or with a high income may not be eligible for this tax deduction.

It is important to note that individuals claiming a deduction under Section 80GG cannot receive tax rebate under other sections for the same rent paid.

How To Claim Deduction Under Section 80GG?

To claim a deduction under Section 80GG, the individual must file Form 10BA along with the income tax return.

The following information is mandatory to fill in the form:

• House rent amount

• Complete address of landlord and assessee

• Rental period

• Rent receipts/proof of rent paid

• Basic information of assessee and landlord – name and contact information

Keep other documents like rental agreement and govt-issued ID cards handy if required while filing the claim. In addition, always ensure that the rent paid is not reimbursed by the employer.

In Conclusion

Section 80GG is a beneficial provision for individuals who do not receive HRA benefits. Individuals can also consult a finance professional to claim deductions and increase savings. However, it is important to meet all conditions under this section to receive the necessary tax rebate.

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