house rent tax deduction

Section 80GG: House Rent Deduction under Income Tax

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Section 80GG deals with the tax deduction on House Rent for a non-salaried or salaried person without any HRA. 

Section 80GG states that a deduction is allowed to an assessee not being an employee who is in receipt of any income by way of house rent allowance, in respect of house rent paid by him in excess of 10 percent of his total income but subject to a ceiling of 25 percent thereof, or 5000 per month, w.e.f FY 2016-17 whichever is less subject to certain conditions like furnishing of a Form No. 10BA by the employee to the employer.

house rent tax deduction

As per Section 80GG, if you are not an employee of any central/state/private company, or being an employee, you do not get any HRA from your employer and bear your house rent expense, then you can claim tax deduction under Section 80GG, provided, you/your spouse/your minor children do not own any residential property in the area of your residence or where you work or do any business or at any other place which is occupied by you.

How much Tax deduction can you claim under section 80GG?

As assessee can claim tax deduction of

  1. An amount in excess of 10 percent of his total adjusted income
  2. Rs 5000 per month
  3. 25 percent of his total adjusted income

whichever is lower.

How to calculate Tax deduction under Section 80GG: Illustration and Example

Ramesh earns a yearly adjusted salary of Rs. 4,50,000. His company does not give him any HRA. He has to pay a rent of Rs.7000 per month. He is from Assam but currently posted in Bangalore. How much tax deduction can he claim under section 80GG?

Considering, Ramesh is not married and does not own any house in Bangalore (and even if he is married, his spouse/his minor children does not own any residential property in Bangalore), then he is eligible for tax deductions. The amount will be the least of the following 3 cases:

  1. Rent – 10 percent of his adjusted salary = (7,000*12)-(0.1*4,50,000) = 96,000-45,000=Rs. 51,000
  2. Rs. 5,000 per month= Rs. 60,000
  3. 25 percent of total adjusted income= 0.25*4,50,000 = Rs.1,12,500

We can see that the lowest among the three options is Rs. 51,000. So Ramesh can claim a tax deduction up to Rs. 51,000 under section 80GG.

How to calculate total adjusted income?

Total adjusted income means his total income minus long-term capital gain and short term capital gain of 10 percent category and all the deductions that come from Section 80C to Section 80U expect foreign company income and section 80GG

How to apply for Tax deductions under Section 80GG?

To apply for Tax deductions under Section 80GG, fill the form of 10BA which can be downloaded from the below-given link:

FORM-NO.-10BA for Section 80GG tax deduction

Section 80GG FAQs – Most Common  Queries

  1. My family lives in a different state and I am posted in a different state. I am not given any HRA. I am paying 4000 INR house rent. Can I claim it as a tax deduction under Section 80GG?

Answer: Yes, you can claim it as a tax deduction under section 80GG.

2. Can a retired person claim tax deductions under section 80GG?

Answer: Yes, if he falls under taxable income, he can claim tax deductions under this section. If he is not, then he does not need to. (Answered by Hemlata Ojha, a CA from Delhi)

3. I get less HRA than my actual house rent. Am I eligible for tax deduction?

Answer: No. If you are getting HRA, no matter what amount it is, you will not be eligible for deductions under sections 80GG. (Answered by Dhanesh Karnani, a CA from Kolkata).

Have more questions on Section 80GG or home rent deductions? Ask.

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